Mortgage Bonds Remain Weak

Mortgage bonds remain in a downward trading pattern, driving mortgage interest rates higher as prices fall.  With today being a slow day for scheduled economic reports, markets will trade heavily based on the technical outlook.  With stocks appearing over-bought, we could see a slowing in the pace of gains for stock investors.  However, more good news on the trade negotiations with China could add more fuel to the stock rally and drive prices even higher.  Since stocks are now in unchartered water, there are no reliable ceilings of resistance to help predict at what point stocks prices will stall.  Until something causes stock prices to break lower, there is great risk that mortgage rates will continue to climb.

With both the stock and bond markets closed on Monday in observance of Veteran’s Day, we may experience a slower day of market trading.  Many investors could be taking the day off to start the long holiday weekend.  In such times, volatility can increase.  Therefore, we must be careful today for strong moves that could move mortgage pricing higher.

Until mortgage bonds are able to break out of the downward trading channel, we will maintain a locking bias.