The 100 day moving average has so far provided support for mortgage bond pricing, preventing mortgage interest rates from taking another step higher. This has been a very reliable floor, only falling below this trend line for a short period of time in all of 2019. Given that the prior break beneath this critical level was within the most recent two weeks, we are still in great risk of another drop. With the 25 and 50 day moving averages just above current bond prices, the trading range is very tight. This means that bonds will be making a break to the down or up sides in the days to come. Let’s cross our fingers that prices hold strong and we don’t see another break beneath the 100 DMA, for that could spell higher rates going into winter.
Economic reports of the day have been favorable for mortgage bonds. However, the news wasn’t enough to help make too much of an improvement to mortgage bond prices. It seems that the trade war negotiations are getting a bit cloudy, which isn’t good news for the stock market. However, in spite of this, stocks prices are holding steady so far this morning. I don’t expect to see much change today.
Given that bonds have the ceiling provided by their 25 and 50 day moving averages, we will maintain a locking bias.