Stocks are falling this morning and mortgage bonds are climbing a bit higher today. Yesterday’s bond market rally ended in late trading, with bonds breaking back below the ceiling that they fought so hard to overcome. There just wasn’t enough reason to justify bonds moving above pricing that has not been seen in over three years. Therefore, the afternoon weakness was anticipated. However, bond pricing remains just beneath the important overhead ceiling, which puts mortgage interest rates right about at the 3-year low point. As discussed yesterday, we must be cautious here, as each of the two times bonds reached this level in the past three years they fell sharply within a few short days.
Consumer Confidence remains strong, with the Preliminary reading for June reported at 94.3. Although a bit lower than the 94.5 anticipated by the markets, it still shows that consumers are feeling optimistic about the future. It should be considered that in times when consumers feel the best are also leading indicators of economic challenges to come. The old saying, “Buy when others are selling and sell when others are buying” is something that is going through many wise investors’ minds right now. When the stock market, and any investment for that matter, reach a point of feeling bloated, it causes reasons to be concerned.
Unless bonds are able to make a decisive break above the current overhead resistance, locking remains the safe play.