The Battle Continues

After another temporary break above the 200-day moving average, bonds are once again right back beneath this critical level. In all my years of watching bond market activity, I can’t remember a single instance where bonds nonchalantly passed above and below this significant level so many times in a short period. Although the 10 Year Treasury Note yield has been below this level for many days now, mortgage bonds seem unable to commit to one direction or the other. At some point soon, bonds will be forced to commit to a path. Given the reluctance to stay above their 200 DMA, it seems to be less likely that will be a favorable move for mortgage interest rates.

The oil price decline is putting the futures of many oil dependent countries, such as Saudi Arabia, in question. The stated goal within the aforementioned region is to be financially stable with far less oil sales. The economic transition to solar power will have lasting implications to our global economy. This will continue to drive GDP lower as the cost of energy declines and technology improves. This is a long-term benefit to mortgage interest rates.

With bonds remaining below their 200 DMA, we will maintain a locking position. If bonds can rally high enough to make a decisive break above this level, we will switch to a floating bias.