Locking bias

The market continues to trade with high emotion and volatility, as current and old Federal Reserve members repeatedly spook the markets with talk of rates
moving higher.  Now that mortgage bonds are beneath their 200 day moving average, which hasn’t happened since early April of 2014, bonds will
have a tough battle to break back above.  A break above or beneath the 200 DMA can often signal a change in the direction of where bonds are heading
in the future.  Based on the current path, this could once again mean that we will be moving into an extended period of higher mortgage rates.
If bonds don’t recover quickly, that will likely be the case.


Negative financial reports continue to dominate the headlines. Today we learned that Retail Sales for the month of April were reported to have 0% change
on a month to month basis.  This was lower than the market’s expectation of +0.2%.  Retail Sales less autos and gas were reported to be +0.2%,
which was also lower than the +0.4% anticipated.  This clearly shows that consumers are reluctant to spend money, which is the crux of our economy. 
Consumers need to increase their spending in order for our economy to continue to grow and thrive. 


With mortgage bonds still beneath their 200 day moving average, we will maintain our locking position. Once again, we hope to see mortgage bonds remain
near where they are or improve from here.  If they break beneath the current support, that would be a very negative reflection of where mortgage
rates will be heading from here.

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