As expected, mortgage bonds are nearing the bottom of the trading channel. This puts mortgage interest rates at multi-year highs. The 10-Year Treasury Note yield is now at 3.03%, which is just shy of the 3.04% target we identified as a potential high. If the yield climbs beyond this critical level, interest rates will be in territories that we haven’t seen in many years. In fact, the 2 Year Note yield is already at 10 year highs, which could soon be the territory we find for mortgage interest rates. Ugh. Not good news for those looking to purchase a home this summer. However, as we often hear, the rates are still historically low. It’s just that we have become spoiled over the past ten years with well below average interest rates.
Retail Sales came in showing a growth rate of 0.3% for the month of March. This was inline with what the market anticipated. However, bonds are trading heavily based upon the technical picture, so there is not much expectation that even a low report would be able to positively impact the bond market. This is a painful upward trend in mortgage rates that we’ll just have to endure.
It seems likely that bond prices will continue to worsen in the short term. As a result, we will maintain our locking bias.