Mortgage bonds are again holding steady this morning. With a low level of economic reports scheduled for today, the markets will be most heavily influenced by the technical picture. With the 10 Year Treasury Note yield still above its 200 day moving average and with mortgage bonds pressing up against a still ceiling of resistance, we are now at a critical junction in both markets. The path of least resistance will be for both markets to see prices deteriorate from this point. Therefore, we have to be on guard.
With the 10 Year Treasury Note yield remaining above its 200 DMA, there is negative pressure put on the bond market. At this point, it would be an exception to see the 10 Year break below its 200 DMA. As counter intuitive as it may sound, the one key force that could help pressure interest rates lower is for the Federal Reserve to actually raise short term interest rates. This was exactly the pattern we saw last December after the Fed raised interest rates. Although the odds of an increase have actually dropped the past couple of weeks, we still see a December increase as being likely.
With minimal forces in place today to help bonds improve, we feel now is a great time to lock.