Although only down 10 basis points so far this morning, mortgage bonds are under pressure as the stock market seeks to set new all-time high records once more. The power within the stock market continues to defy logic, as investors continue to show confidence of an unstoppable market. However, history shows that every rally eventually has an end. A look at stock charts covering a four your period shows nearly straight up movement up until the end of August in 2015. At that point, volatility elevated and the general trend of the market began moving in a sideways trading pattern. Although still able to hit new highs, the market appears fatigued.
The rally in the 10 Year Treasury Note market faded this morning, pushing yields back above their 25 day moving average. They are now stuck in between their 25 and 100 DMA, and threatening to break above overhead resistance. Should that happen, mortgage interest rates will be pressured higher as well. This move is also heavily influenced by the strength within the stock market. If stocks continue to move higher, that could provide the catalyst to push the APR on mortgage interest rates higher.
With bonds currently under pressure, we will recommend a locking bias. The APR of mortgage rates has improved over the past few days. It may be a good time to lock in the gains we have been fortunate enough to have.