The 5-year bond–which is normally correlated with fixed mortgage rates–has had a massive rally over the prior three months. Its yield, as always, has moved inversely (down in this case).
Now, technical analysts are likely looking at the chart above and calling for a correction higher. For those into esoterica, pattern watchers term this a 2B reversal.
To most this is hocus pocus, especially to academia. We never advise clients based on this kind of stuff. There is always the possibility or rates collapsing back down and making new lows.
That said, some traders believe strongly in these types of patterns.
(Chart data from the Bank of Canada)
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Sidebar:
There are fundamentals driving yields higher as well. Bond expert and InYourBestInterest.ca host, Hank Cunningham, says "one of the fallouts of the budget will be a record issuance of Federal bonds this year, some $82 billion." Moreover, the US treasury is issuing an astronomical $2.5 trillion worth of its own notes and bonds this year. New supply typically has an upwards influence on bond yields.
Last modified: April 29, 2014
I agree. This looks like a big bottom for the time being.
im sorry i have no clue what ur saying :S… are the five year fixed rates going or up???
Signing a first mortgage in less than 2 months!
thx
“are the five year fixed rates going or up???”
If this is a bottom then by definition rates must go up. If….
Yields are up again today. I wouldn’t be surpised if lenders start raising soon.
Seems to me that the odds of the mortgage rates going up in the next two years is quite high. This year, who knows. If I can lock in now at 4.29%, it feels safe to say the rates will come back to that level or higher within 5 years.
Odds of the rates going lower is much less, than higher.
I can always hedge and leave some at variable and some at fixed.