I always love May -- it has my birthday, my anniversary, the flowers are blooming and summer is kicking into gear!
Mortgages rates, on the other hand, did not fare well during May. Just look at this chart below on mortgage bond prices (prices down, rates up).
That blue line being plotted on the chart is the 200 day moving average. This is a very good indicator to show the strength or weakness of the market on a longer based view.
As you can see above, mortgage bond prices have tanked since early May. They are now at the lowest point they've been in over a year.
While no one really wants higher rates the ones we have after this decline in price still are low in comparison to most of history.
The important signal we are getting from May's price action in mortgage bonds is that we may have finally tipped over the edge and the end of the long, 11 year cycle in lower rates.
A secular change is underway.
While the market will still ebb and flow the longer term trend will be for lower prices (higher rates) for mortgage bonds.
Have a great weekend!
Brett Grendahl
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