Locking bias

So far this morning, mortgage bonds gave up the minimal gains they made yesterday and are again sitting at lows not seen since early October 2014. 
This puts mortgage rates at their highs of the past 8 months.  It seems that the bond market may not have yet found their floor, which means that
rates could continue to get worse. The overall losses we have experienced in this bond market meltdown are still less than half of the pain we suffered
through when the bond market broke down in May of 2013.  We all remember the nearly 1% increase in mortgage rates that happened in a matter of
a couple months and caused our housing market to stall.  Hopefully this won’t be a repeat of that experience.  However, it is certainly possible.

Although today is a relatively quiet news day, we already received a strong report on the housing market as well as a strong report from the National Federation
of Independent Business (NFIB).  CoreLogic released their National Foreclosure Report for the month of April, which showed that the number of
foreclosures on the market continues to decline.  Currently, there are 521,000 homes that are in some form of foreclosure, compared to 694,000
a year ago.  This represents a decline of 24.9%.  The NFIB then reported that optimism among small business owners increased from 96.9 up
to 98.3.  This is the strongest reading of the year and was better than expectations. 

Mortgage bonds are just barely holding on to another critical layer of support.  If this level breaks, which is now appearing likely, there is little
support beneath us to stop bonds from moving another leg lower.  Given this picture, the safe play is to suggest a locking bias.