The S&P 500 is currently at a new record setting all time high level this morning, which is creating headwind for mortgage bonds. Bonds are right
now sitting on their 25 day moving average, which has provided nice support for most of the past few weeks. A break beneath this level would
be a negative sign for the near term direction of mortgage interest rates. With the next floor of support about 51 basis points lower, there
is a long way for bonds to fall if they break lower.
Today is a quiet economic news day, so bonds will likely trade based upon technical factors, including the stock market. The economic calendar heats
up as the week progresses, with Wednesday and Thursday being of most significance. Wednesday will begin with a report on Gross Domestic Product
(GDP), and will later have the Fed Decision in the afternoon. (As we have been saying, we don’t feel there is much chance of a June rate hike.
Hopefully this will be made apparent in their announcement.) On Thursday we will have an update on the Personal Consumption Expenditure (CPE).
This happens to be the Fed’s favorite gauge on inflation.
The two most important reports that will dictate the direction of mortgage interest rates are inflation and GDP. Since we will be receiving updates
on both this week, we can expect to see some volatility in the interest rate market. Combined with a Fed announcement, it is likely we will have
a swing in one direction or the other. This increases the risk of floating. Therefore, the safe play will be to lock.