Mortgage pricing has been vacillating between the floor and ceiling of resistance now for the last week, keeping interest rates steady Eddie. The technicals indicate that will change over the next week, as the previous two days trading patterns have formed “doji stars” (which is where the price moves significantly up and significantly down and then closes at the opening price). The doji is almost always followed by a rapid change. Mortgage bonds open higher today and then sold off, losing 34 basis points from the high. Lower price is not the direction we want to head if we desire lowere interest rates.
The Fed’s Beige Book was published this morning, indicating that 42% of the districts across the country are experiencing flat or even contracting economic activity. The last times we saw this happen was March 2001 and January 2008. Since this is not an Econ history exam, I’ll tell you that each one of those periods was followed by sustained recessionary activity. Traditionally, recessions do usher in lower interest rates, which begins the cycle of growth once again.
