Switching back to a locking bias

The 10 Year Treasury Note yield fell below the 2.18% target we’ve been watching in late day trading yesterday. However, yields have moved higher this morning and are now at 2.21%. This bounce shows the resilience of the 2.18% floor, and could signal a further increase in the days to come.  A longer look back on history supports the likelihood of a strong move higher from this point.  Since yields have been dropping for several weeks now without much a pullback, we are due for a move higher.

The stock market is moving higher today, which is also contributing to yields moving higher in the bond market. At 12:00 pm MST we will get a look at the Fed’s Beige Book, which will outline the Fed’s opinion of the current economy.  I anticipate it will reiterate the recent growth in the labor force and increase in inflation, as well as the overall improvements in most economic sectors.  The very talk of growth from the Fed can spark panic in the bond market, adding upward pressure to mortgage rates. Therefore, be careful as we approach today’s release.

Given the reversal in recent trend, we will switch back to a locking bias.