Locking bias

After a rough day on Friday, mortgage bonds started higher at the opening.  Although there was very little in terms of economic reports to drive the
market higher, the reality is that the markets are trading more based on emotion at the moment than current economic reports.  This has created
obvious challenges in predicting the short term direction of mortgage interest rates.  The stock market has proven its resilience to negative
economic news, which has furthered concerns of an asset bubble in the stock market.  The Fed is certainly concerned about this, which is one of
the main reasons many are pushing for an immediate rate hike.  However, a hike at this time could further hurt the US economy, which is currently
showing early signs of a recession.  The Fed is certainly in a pickle at this point. 

Mortgage bonds are once again above their 200 day moving average.  If bonds are able to make a decisive break above the 200 DMA, they could be on
track for continued improvement.  Bonds are now near the top of the downward channel.  Therefore, they are not yet out of the woods by any
means.  Based on the chart patterns, it is likely we will see a significant move in one direction or the other.  It is encouraging that bonds
are trading favorably.  However, it’s too early to predict a break out for the better.

With bonds at the top of a downward channel, there is great risk in floating.  If you choose to float, watch the market closely.  If bonds break
down and lose steam, lock in quickly to take advantage of the recent improvements in the market.