We nailed it perfectly in yesterday’s commentary. Mortgage bonds lost steam and dropped to the bottom of the trading channel, pushing mortgage rate pricing higher. There has been follow through to the downside from the opening this morning, with mortgage bonds falling through support of their 50 day moving average. Bonds now have a long way to fall before hitting their next support level at the 25 day moving average. At this point, it seems likely this will happen. That could impact mortgage rates by .125% from where they opened yesterday morning. Further hurting interest rates is the 10 Year Treasury Note, with its yield heading higher and now above its 50 day moving average. All of these are very bearish signals and not great indicators of good things to come with respect to interest rates.
Today is a quiet news day. This morning we had Weekly Unemployment Claims for the week ending 3/21/2015 showing better than anticipated levels. While the market was anticipating 293,000 new claims, the actual figure came in at 282,000. This represents a drop of 9,000 from last week’s 291,000 and shows a build-up of strength as we enter the hiring season of summer. Next week we will have the Bureau of Labor Statistics report of job growth for the month of March. If the report shows continued strength in the job market we can anticipate interest rates to react by moving higher.
With the bond chart appearing very negative, we are going to maintain our locking bias. Hopefully, bond will find stability and push back above the 50 day moving average. A close beneath that level would be very negative and not a friendly sign for interest rates.