Bonds Remain Trapped 10/9/2019

The ceiling of resistance in bond prices continued to prevent mortgage interest rates from improving. With prices falling once again this morning, the nice upward trading channel that bonds have enjoyed for the past couple of weeks has now been breached and a new downward channel is starting to form. With both the 50- and 25-day moving averages not too far beneath current levels, I am hopeful that prices will stabilize and prevent mortgage interest rates from taking too much of a price increase. Much will depend upon the stock market, which is now celebrating good news on the trade war with China. It’s laughable at this point how sentiment can reverse course so often, and how investors play into the drama. For now, we’ll wait until the next round of bad news hits.

Meeting Minutes from the most recent Federal Reserve FOMC Meeting we’re released today. As expected, the Fed members are not in alignment. Many still believe there are no economic concerns and rates should not be lowered. However, this was a consensus back in 2007, when the Fed epically missed predicting the largest recession since the 1930’s. I believe the Fed will continue to drop rates, regardless of what some nay-sayers believe.

For now, bond prices remain beneath a critical ceiling. Until that ceiling is penetrated, we will maintain a locking bias.