Strong locking bias

Mortgage bonds have made the break we have been talking about in recent market updates.  Unfortunately, as predicted, it was to the downside in price. 
As price moves down, interest rates move up.  This happened after 14 failed attempts to make a break to the upside.  Finally, mortgage bond
investors became weary and realized that pricing was likely as high as it would get in the short term.  Therefore, they began selling their bond
holdings to take some of their chips off the table.  As this happens, more and more auto sell orders are triggered which increased the number
of bond sales in the market.  The sharp drop in pricing typically escalates until bonds find their next floor of support.  However, that
is about 30 basis points beneath current levels, which means that things will get worse before they improve. 

There was strong Housing News released this morning, starting with Existing Home Sales that reported to be much stronger than expected.  Sales were
up 6.1% at a 5.19 million unit pace, which are nearly double the markets’ expectations.  Sales were up 10.4% on a year over year basis to their
best level in 18 months.  The Median Home Price was reported at $212,100, up 7.8% year over year.  Housing Supply is still very low, with
only 2 million homes currently for sale in the market.  However, this is an improvement of 2% and is on a nice trend higher.  With every
aspect of these reports showing strength, it is a positive sign for our housing market as we move into the stronger months of home purchasing. 

With mortgage bonds making a break below the old sideways channel, we will maintain our locking bias.  The downward move in price could increase in
velocity as more bond holders decide to get out before they accumulate additional losses.