We thought that bond prices may hold at the 50-day moving average yesterday as they had the last four times that they tested this level. However, the stock market rally was too strong which pushed rates higher again. Here is a chart which shows pricing dropping below the 50-day moving average (black line):
From a technical perspective mortgage-backed bonds still have some room to drift lower so we might see rates move higher by another .125%-.25% before they stabilize. What could save the day? Merrill lynch reported weaker than expected earnings earlier today and Citi Bank is scheduled to release their earnings report tomorrow. Another weak report could help mortgage-backed bonds rebound and hopefully push rates lower.
Current Outlook: locking