May 21

Today is a Fed Meeting Minutes release day.  The minutes will be released at 12:00 p.m. MST, and will likely create volatility in the market today.  Of the last 20 Fed Meeting releases, 18 of those times were damaging to the bond market, pressuring interest rates higher.  We will have to see if the contents of the minutes are helpful or hurtful to the bond market.  Hopefully there will be bond-friendly news.

After taking a beating yesterday, the stock market is back to its old tricks today, with the S&P 500 currently up 12 points and the DOW up 126 points.  This, of course, is pushing bond prices lower, while moving interest rates higher.  However, mortgage bonds are still in an upward channel.  The danger is that they are now at the bottom of the channel and are at risk of breaking beneath support.  The Fed Meeting Minute release could be the catalyst to cause a break below or to get bonds heading higher.

Mortgage purchase applications were reported to be down another 3%.  Given that we are in the buying season, this is negative indication of the current state of housing and our economy in general.  The markets anticipated an increase in the number of people applying to purchase homes, so this is just additional proof that our economy was not yet prepared for the increase in mortgage rates that we saw happen last year.

With mortgage bonds struggling so far today, and given the potential volatility from the Fed Meeting Minute release, the safe play is to lock.  However, until we break beneath support we are still in an upward channel.  If we break below, a short term locking bias is certainly prudent.