Interest Rates Continue to Deteriorate

Mortgage bonds have continued to slowly lose value day after day, which has taken its toll on mortgage interest rates. On Friday, mortgage bond prices fell beneath their 25-day moving average. This is not a good sign for mortgage interest rates in the near term. Bond prices are now resting just on top of their 50-day moving average. If they break beneath this critical floor, there is a long way for prices to fall before hitting their next significant support level provided by the 100 DMA. We need to closely watch the direction of the stock market. If stock prices can break above all-time high levels, we can expect to see mortgage interest rates continue to worsen.

This is a relatively slow week for scheduled economic reports, so the market will trade heavily based on the technical outlook. At this point, that is not looking favorable. We will receive several reports on the strength of the housing market, which given the spring season upon us, we expect the reports to show a strong housing market. This could also add upward pressure to interest rates.

Given the continued headwind against mortgage interest rates, we will maintain a locking bias.