Cautiously floating and watching

Mortgage bonds are slightly higher this morning, and have broken above the downward channel they have been in.  This is a very strong technical signal, and shows a great deal of strength in the bond market during a time when the stock market is near record highs.  As we talked about a few days ago, the bond market is more often an accurate reflection of the overall economy, which is why rates can improve even during times that stock investors are pushing stocks higher.

Durable goods orders, which are goods that have a shelf life of at least 3 years, were reported to be -1% last month.  Although anticipated, it certainly doesn’t show strong growth in the economy.  Also, weekly unemployment claims were reported at 348,000, which is an increase of 14,000 from last week’s revised number of 334,000.  As we have mentioned the past few weeks, this seems to be the new range of weekly claims.

We continue to be in a dangerous position with stock market.  It is a matter of time, but there will be a break one way or the other.  If the stock market moves higher, this will be a drag on mortgage rates.  However, if the stock market backs down from current all-time highs, mortgage bonds will be the beneficiaries.   When a clear move in the stock market happens, we will alert you.  For now, bonds are trading above support, so can float.  If bonds reverse course, as they often do as the day wears on, then quickly lock to protect the gains.