Could Bonds Be Getting Tired?

Mortgage bonds remain stuck at the bottom of the trading channel, as the markets contemplate their next move. Stocks continue to move higher, which could ultimately be the catalyst to force bonds beneath the floor of support that has held mortgage interest rates from taking another step higher. The higher stocks climb, the more likely we are to see mortgage interest rates move higher.

Today is another relatively slow day for scheduled economic reports. As a result, the technical picture will heavily influence the markets. Given the strength in the stock market, this could be a problem. Mortgage bonds remain above a critical level of support. However, if this level is breached, rates will take a step higher. Since a breakout is an exception and not the rule, let’s hope that bonds hold their ground. However, we need to be ready to lock if this barrier is breached.

The risk of floating if high. Do so only if you are able to closely watch the markets.