Mortgage bonds have been battling their 50-day moving average today. So far, bonds have spent part of the day above as well as below this critical level. With no clear market direction, bonds could remain in this game for a bit. Tomorrow’s economic news could stir things up a bit, with Initial Jobless Claims for last week being reported. Since this will be the “sample week” that supplies data for February’s Bureau of Labor Statistics’ Jobs Report, it will be more important than an average release. With the labor market being one key component that several Fed members would like to see make additional gains prior to continuing with rate hikes, tomorrow’s report could help push the Fed in one direction or the other.
From a technical position, bonds have held up well despite overwhelming strength in the stock market. However, the longer bonds battle over their 50 DMA, the smaller the odds become of bonds being victorious in the battle. Eventually, bonds could wear down and lose their composure. Much will depend upon how stocks perform in the near term. If stocks continue their climb higher, bonds will have more difficulty holding their ground. We must wait and see how things play out.
While bonds continue their battle over the 50 DMA, there remains great risk in floating. Therefore, we will maintain our locking bias.