Meant to post this late Friday.
Notes, bonds, and mortgage backs are taking a little heat as low volume selling continues to pepper the market. Currently, stocks are off 20 points, 10 year note off 34/32’s, and mortgage backs are off 11 to 14/32’s depending on the note rate. If you look at the attached chart (10 year note futures), you will see that the market is currently resting on the uptrend line. This trend began in late February has continued to support the market but is now under attack. Notice the 122 08 futures level on the right side of the chart. The yield equivalent on cash 10 year notes is 2.91%. Currently, we are trading at 2.89%. Tricky call here as the selling today has created new bearish signals on 14 day stochastics, MACD, and 8 day ADX. Any close above 2.91% will be confirmation that a stronger move towards higher mortgage rates and pricing is underway. Given the weak economic conditions and heavy Fed buying influence, we feel this is closer to a bottom than a new bearish move in the making. However, the market does not always listen to our bias. Have a great weekend.