Waiting on the Fed

Not much change in the mortgage bond market once again today, with bond prices remaining trapped within the tight trading range that has been in place for several weeks now. The overall news driving both stock and bond prices continues to be mixed, which is creating a push-pull environment that doesn’t give investors a clear direction on a future path. Surprisingly, recent reports on the housing market showed continued weakness developing. Given that we are heading into the strong summer purchase season, this isn’t the news many in the housing industry were hoping for. As I’ve stated for months, I see weakness growing as we play out the final stage the current economic cycle.

Today we will receive the Meeting Minutes from the most recent Federal Reserve FOMC meeting. This will provide some insight into thought process of each individual voting member, as well as the temperature of the Fed overall. With the recent volatility within the U.S. economy, my hope is that the Fed will provide a bearish tone that leans toward a future rate cut. Considering that most everyone was expecting rate hikes just a few short months ago, this would be a wild swing for the market to digest. Regardless of the tone of the statement, I continue to believe the next move the Fed makes will end up being a cut. I believe they should admit the last hike was the wrong move and make the change quickly.

Until bond prices can show the strength to break out of the current trading range, I will maintain a locking bias.