Bonds Remain Range-Bound

Mortgage bonds continue to be squeezed between their 25 day moving average as a floor of support and their 100 day moving average as a ceiling of resistance. Eventually, bonds will be forced to make a decision as to which direction to break. Given the strength of the 100 DMA, odds favor a breakout to the downside. That would be bad news for mortgage interest rates, which move higher as bond prices fall. Once a breakout occurs, it has a strong likelihood of being a strong one. Meaning we will likely see prices move enough to push rates higher or allow them to improve. What will be the catalyst?  It’s hard to say. It could be the pending earnings reports that are scheduled for release in the days to come or possibly statements by the Federal Reserve members. We’ll have to wait and see.

Although there is no immediate need to rush to lock, there remains little incentive to float. Therefore, we will maintain our locking bias.