Bonds Soon Looking for a Breakout

Mortgage bonds are holding their ground in early morning trading, waiting to decide if they will soon be making a break higher or lower. The break in one way or the other will happen in the very near term. If stocks, which are once again currently sitting at fresh all time highs, happen to take a long overdue pull back, we will likely see mortgage interest rates improve. However, since that would require a trend reversal, it isn’t something we can count on. As a result, we will need to remain optimistic that rates will improve soon.

Fannie Mae and Freddie Mac are projecting higher mortgage interest rates ahead, in what both claim will cause mortgage activity to slow sharply in 2020. I, on the other hand, believe that the US economy is heading towards a recession, which would likely help soften mortgage interest rates. I believe that the Fed, and many economists in general, tend to miss when it comes to predicting recessions. Of course, only time will tell. One thing I do know, mortgage interest rates remain at low levels, and people considering a refi shouldn’t pause in hopes of lower rates in the future.

Until mortgage bonds have made a decisive break above their moving averages, a locking bias remains prudent.