After working their way to the bottom of their trading pattern, mortgage bonds are now heading higher and will soon hit the top. From there, we can expect bond prices to be pushed lower, as bonds have not been above this critical level for months. Unless there is a significant reason for prices to break this level, we will continue to trade within this range. A longer term look at both mortgage bonds and the 10-Year Treasury Note yield charts show that there is more reason to be concerned about prices breaking beneath the floor than there is hope prices will break above the ceiling This is just the current reality, and one which we should be grateful that prices maintain stability within a tight range.
Stocks start the day in the red. There hasn’t been any significant economic reports so far today to drive the markets lower, so this is just a technical move. If the stock market experiences at least a temporary retreat, mortgage bonds will benefit. However, given the current path of stocks, I wouldn’t expect the strength in the market to slow until it has a more drastic reason. Therefore, I don’t anticipate mortgage interest rates making significant improvements in the near term.
We will maintain a locking bias.