Investors Await News

Mortgage bond pricing continues to slowly drift lower as a downward trading channel becomes more established. There is about 30 basis points to go before bonds find support. However, since this support level isn’t necessarily a strong one, bond prices could easily drift lower once they hit this level. Given that there is not much room above current pricing before bond prices hit a triple layer of overhead resistance, it seems likely that we will see interest rates be pressured higher in the near term.

This will be an action-packed week for the bond market, with several key economic reports scheduled for release. First, the Federal Reserve begins their two-day FOMC meeting tomorrow, with a decision on interest rates to be announced on Wednesday. Although they will not be raising rates this time, the markets will be listening for clues as to how many more hikes they project in the months to come. If the tone continues to be tightening, investors could panic.

Later in the week we will get updates on the labor market, with ADP scheduled to release their estimate of new hires in the month of July on Wednesday, followed by the Bureau of Labor Statistics’ (BLS) report on Friday. The market is currently anticipating 172,000 from ADP and 188,000 from the BLS. Given that both numbers are below the longer-term average, reality could easily beat expectations. That would add upward pressure to mortgage interest rates.

Given little hope of improving rates, we will maintain our locking bias.