Although mortgage bonds remain above their 50- day moving average, they now face a second significant level of over-head resistance. The last time bonds were above current levels for more than a couple of days was prior to the significant drop in bond market pricing that followed the announced presidential election results back on November 8th of last year. If bonds could just make a decisive break above current levels, we could see mortgage rates improve to new lows of 2017. Since there have been multiple failed attempts to make that happen, it seems unlikely that it will happen this time without some added support from a falling stock market. Could that happen? Yes, but it isn’t the likely outcome.
Consumer Sentiment in the US continues to climb higher, rising from a reading of 95.7 up to 96.3 in the month of February. The post-election euphoria is clearly still intact. As time goes by, however, the odds of a stock market correction continue to mount. When that does happen, bond prices will likely move higher and mortgage interest rates will benefit.
Once again, we are in a position where the likely outcome is for bond prices to move lower. However, there certainly is a chance that bonds will break above resistance and rates will improve. With the general rule being to float when at the bottom of a channel and lock when up against a ceiling, we will maintain our locking bias.