After a downward move in the bond market, mortgage bond prices are climbing higher this morning. This follows yesterday’s S&P 500 hitting new record high levels. There is a lot of optimism in the market surrounding President Trump and his meeting with the President of China at the G20 meeting last week. It seems that both left the meeting showing a favorable relationship and a hope to end the trade dispute that each have been dealing with. Although this doesn’t necessarily mean that we are on a path of an agreement, the US stock market has taken this as an opportunity to drive stock prices higher. Of course, we are only one chat away from reversing this momentum.
Mortgage bonds are now climbing toward the top of the trading channel. I fully anticipate bond prices to fall as soon as they reach the top of the channel. Further, mortgage bonds are due for a correction. All in all, I believe that we will soon see mortgage bond pricing deteriorate. Although the deteriorating market will be short lived, it means we have only small improvements to the bond market before we see a mild reversal.
I continue to see rates heading slightly higher in the near term and lower in the long term.