Float or Lock, that is the question….

Yesterday’s S&P 500 rally stumbled in the late day and failed to close above all-time highs.  However, it did set a new intraday high at 1858.  In the end, mortgage bonds had a fairly stable day yesterday, which is a positive sign considering the headwind of the over-achieving stock market. J

We had multiple housing reports released this morning with the overall tone not stellar but stronger than anticipated.  Case-Shiller reported a .8% increase from last month and 13.4% on a year over year basis.  Robert Shiller was interviewed on CNBC following the report stating that inventory is tight, rates are still great and homes are still affordable.  Most importantly, he continued to endorse that now is a great time to buy.

Mortgage bonds opened higher this morning and are now just above the 200 day moving average.  This is a significant move as we mentioned yesterday the battle that was brewing with mortgage bonds.  When bonds get pinched between resistance and support, they are forced to make a move one way or the other.  In today’s case, bonds went the way we hoped they would.

Mortgage rates will likely be heavily influenced today based on the direction of the stock market.  If stocks power higher, that will be a drag on mortgage bonds.  However, if stocks weaken after yesterday’s attempt to close higher, mortgage bonds will likely be the beneficiaries.  For now, we anticipate a somewhat sideways trading pattern in which there isn’t much benefit to float.  However, there also doesn’t appear at the moment to be a significant need to lock either…..