The US stock market found support just above its 25 day moving average and is now moving higher. This is sucking the wind out of the bond market rally. Although bonds are still within a whisker of multi-year lows, they were not able to break above the overhead resistance that has been in place since 2013. However, mortgage pricing is extremely attractive, making now an excellent time to purchase or refinance a home. Since history has proven that these opportunities can quickly dissipate, now is not the time to take risks. The pain of regret could outweigh the small potential benefit of a minimal market improvement, if that becomes the case.
The Federal Reserve meeting minutes from the March 16th meeting are due for release at 12:00 pm MST. Generally speaking, days when Fed minutes are released are not favorable days for mortgage bonds. Based on Janet Yellen’s comments after the meeting, it is clear that she believes the Fed should be patient and not increase interest rates just yet. However, we know that some Fed members are quick to change their opinions following stronger than anticipated economic reports. In the days following the meeting, we have received many reports that show strength continuing to grow in the US economy. Therefore, the comments could spark fear in the markets if they provide insight as to what the Fed wants to see prior to the next increase. If some of their desires have been met since the meeting, investors could become fearful of a rate hike. Although it won’t happen in April’s meeting, we feel the markets should begin preparing for an increase in the coming months.
With bonds just beneath a critical ceiling, the safe play will be to have a locking bias. The current market presents an excellent opportunity to lock in the gains made in the recent weeks.