Despite it being a quiet news week, Mortgage Backed Securities are at a crucial point. With the 10 year Treasury breaking above the 160 ceiling that had been the last line of defense for mortgage rates, there is no telling how high rates can go. Luckily, right after that 160 ceiling was another at 161. This ceiling has not been tested much, so it is seemingly week. There is one things that could change the trajectory of the Treasury yield and bring some life back to the bond market and that would be the Fed taking a more aggressive stance on quantitative easing and reducing inflation. However, the European Central Bank who was expected to have such a stance, approached it like Jerome Powell did inflation in the last Fed meeting – with a sense of nonchalance. There is a Fed meeting later this week and everyone in the mortgage market is hoping they take a stronger stance. Unfortunately, they will probably follow the ECB.
We are holding a locking bias unless you are able to closely watch the market.