Very carefully floating

Mortgage bonds are continuing their climb higher from Friday.  Also, the 10 year note is moving higher as well, with yields now down to 2.85%.  This is great news for mortgage bonds, and yields look poised to fall to 2.82% or so before hitting resistance.  Today is a light news day, so technical factors will likely drive the markets.  The question of whether or not bonds will continue their current rally will depend if they can break above the duel level of resistance that they are currently bumping up against.  If bonds can muster up the strength to break through, we will see continued downward pressure on mortgagerates.  We must be careful, however, as there is now a long ways for mortgage bonds to fall before finding support should they be pushed lower from here.  We are viewing this as a short term opportunity, where we may see rates at their lowest levels of 2014 in this short period.  We are suggesting to carefully float to give bonds the opportunity to break above resistance.  Should these levels give way, we will quickly change to a locking bias.