Mortgage bonds are losing an important battle, falling beneath their 50 day moving average. The next critical support moving average is well over 100 basis points below current prices, meaning we could see mortgage interest rates rise. With the Federal Reserve scheduled to purchase approximately $4.5 billion worth of mortgage backed securities today, let’s hope bond prices stabilize. However, the tremendous and unexplainable strength of the stock market is not helping. With the short term trend not moving in a good direction, we expect rising rates.
This morning’s ADP report showed that there were only 2,760,000 job losses in the month of May. Although this is a massive numb, it is much lower than the 8,663,000 the market anticipated. The discrepancy came from the millions of people who went back to their previous job in the month of May. Since this should have been factored into their estimates, it’s hard to understand how the projections were so many millions off.
With mortgage bond prices remaining under pressure, we will continue with a locking bias.