Rates Back Near Multi-Year Lows

Mortgage bonds have continued to climb higher, clawing their way back within striking distance of three year low mortgage interest rates.  The strong upward trading channel is now reaching a point to where it is going to face a significant ceiling of resistance, meaning that we could see the improving interest rate trend come to an abrupt end in the near term.  The good news is that we have seen such a nice improvement to mortgage interest rates in the most recent weeks that those who waited to refi when rates moved higher once again have an opportunity to jump in.

Today is a slow day for economic reports, so markets will trade heavily based on the technical picture.  Given the strong ceilings that bond prices are facing, the technical outlook is looking to sour.  This week we will get an update on consumer inflation via the Consumer Price Index (CPI) report.  Last month the reading showed a 2.4% annual pace of consumer inflation, which is well above the Fed’s target rate of 2%.  If this month’s report is once again strong, we can expect to see mortgage bond prices move lower, which will push mortgage interest rates higher once again.  However, if the report is tame, this could give bond prices the boost needed for interest rates to improve even more.

With bond prices now at a strong ceiling of resistance, we will switch to a locking bias.