Rates Pressured Higher

The slow pace of gradual losses in the mortgage bond market picked up the pace this morning, with mortgage bond prices falling sharply following positive trade news out of China. The ping-pong effect of the trade war has been so dramatic that I am now numb to the good days and the bad. Following every announcement has been a period of reaction then a reversal. So, today’s impact on the market means very little to me.

Mortgage bond prices have been pushed below two critical floors of support. This is not good news for the near-term direction of mortgage interest rates. With stocks prices continuing to advance higher, we can expect to see interest rates progressively inch higher. Unless there is news that causes investors to pause, or unless they realize the adverse impact the federal shutdown is causing, stocks have an unobstructed path up to their 100-day moving average. If this level is also broken, we can expect to see stock prices make a major advancement higher. The next couple of weeks could be interesting.

With bond prices remaining under pressure, we will maintain a locking bias.