China’s Economy Weakening

Mortgage bonds are battling the ceilings of resistance provided by the 25, 50 and 100 day moving averages. At this point, each of these resistance levels are within a short distance of each other, reducing the odds of this being a successful attempt.  Since breakouts are the exception and not the rule, it’s not likely this will happen. However, there is a strength building up that just may have the force needed to do this. If all three resistance levels are broken, then mortgage bonds will have a clear pathway to continue climbing higher. That would help bring mortgage interest rate pricing lower, which would be a great thing to happen right now. So although I’m overall not expecting a clear break out, I’m optimistically hopeful. So let’s watch and see how this plays out. It would be nice to see mortgage interest rates take a step lower.

Global recession fears are once again a concern, with China continuing to show signs of slowing. In fact, it was reported that China is now growing at its slowest pace since 1992. Given that this is the world’s second largest economy, that number should be getting more attention than US stock investors seem to be acknowledging.

Germany reported a GDP increase of 0.1% in the latest quarterly report. This narrowly missed being negative, which has at least for now helped Germany officially stay out of a recession. A recession is defined as two consecutive quarters of negative GDP growth. So even a slight positive report was a big deal. Germany is the latest economy within the European Union. So given its stature, falling into a recession would spell trouble for the mindset of European investors.

Unless bonds are able to make a decisive break above the triple layer ceiling, we will maintain a locking bias.