What's going on and why does it matter?
Mortgage bonds have improved in recent trading sessions as weaker-than expected inflation and economic numbers may be making it less likely for the Fed to exit their bond-buying program as quickly as previously indicated. Yesterday, the trigger for the bond market rally was the inability of Republicans to advance a healthcare bill, which is likely to delay other items on President Trump’s economic agenda. This leaves mortgage bond prices hovering near their 30-day and 200-day moving averages, which may operate as strong ceilings of technical resistance. It will be interesting to see if bond prices can break above these levels, or if they'll get turned down. The European Central Bank is scheduled to make an announcement tomorrow regarding interest rates in Europe, and this may move the financial markets. The Fed is very supportive of the mortgage market through the remainder of this week, and they are scheduled to purchase up to $1.575 billion of 30-year conventional mortgages today.
What should you do about it?Watch for mortgage bonds to break above their 30-day and 200-day moving averages, but be prepared to lock your rate quickly if bonds start to fall back toward their 100-day moving average.