Mortgage Bonds flirting at their 200 DMA

The stock market is up…. Again…..  This is adding pressure to the bond market, with mortgage bonds right now just beneath their 200 day moving average.  This is an important line, that once violated can lead to a more dramatic drop.  However, it can also be a point at which the bond can muster up strength and make a move higher.  The direction will be heavily influenced by the direction of the stock market.  If stocks lose steam, that could be the catalyst to move bonds higher.  However, the more likely scenario is that stocks continue their move higher which will add pressure to push interest rates higher.

Existing Home Sales for March were reported this morning, showing that 4.59 million units were sold.  This was a small improvement over expectations of 4.56 million units.  In addition, the Median Home Price was reported to be $198,500.  This shows a 7.9% year over year increase, and provides further evidence that our housing market is growing at a strong, but healthy rate.

With mortgage bonds flirting at their 200 DMA, we feel now is not the time to float.  Therefore, we will suggest a locking bias.  The stock market again seems to be on an unstoppable path towards their all-time highs, and economic conditions continue to improve.  In looking back over history, we are moving into the season when interest rates tend to climb higher.  We all remember May of last year, when mortgage rates began their most rapid 1% climb in decades.  We hope that doesn’t happen.  However, in this market, anything is possible.

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