The suspense continues in the bond market, as investors patiently await signs of a clear direction to take. With bond prices still stuck between the floor provided by the 50-day moving average, and a ceiling provided by the 25 DMA, we have had very little volatility in the price of mortgage interest rates the past couple of weeks. However, this won’t last for much longer. Eventually, bond prices will be forced to decide as to whether to make a break higher or lower in price. Overall, the sentiment has been negative, with prices continually hugging the floor. This is not a good sign for the near-term direction of mortgage interest rates, which are at great risk of moving higher in the near term.
US stock prices remain in an upward trajectory, with the S&P 500 not too far beneath all-time high levels. In fact, we could see this record high level be challenged as early as today. This is an incredible event considering that just in early January stock prices were at two-year lows. 2019 has proven to be one of the most powerful years the US stock market has ever experienced. Given that most investors realize that we are on the tail end of an economic expansion cycle, this could spell trouble when the market does retreat. It now has a long way to fall just to get back down to where it was a few short months ago.
There remains great risk in floating an interest rate. As a result, we will maintain a locking bias.