MARKET UPDATE - Thursday, June 2, 2016

What's going on and why does it matter?
Mortgage bonds opened flat today after failing to close above their 30-day moving average yesterday.  The 30-day moving average is now operating as a technical ceiling of resistance.  If bonds can close above this barrier, mortgage pricing may improve.  However, if mortgage bonds fail to break through this barrier, they are likely to continue drifting sideways or take another plunge down toward their 100-day moving average.  This could cause mortgage pricing to get worse.  The European Central Bank (ECB) decided to leave rates unchanged in Europe, and there were no major surprises in their monetary policy statement this morning.  The ADP employment report also came out this morning in line with market expectations.  The market will now turn its attention to tomorrow's highly regarded non-farm payrolls report.  In the meantime, be prepared for continued market volatility.

What should you do about it?
Watch to see if mortgage bond prices can hold above their 30-day moving average.  However, be prepared to lock quickly if bonds break below that level.