What's going on and why does it matter?
Mortgage bonds are continuing to trade near their best levels of the year as government bond yields across the world are at record lows. The 10-yr US treasury yield remains below 1.7%, an important technical indicator that may signal lower rates ahead. German 10-yr government bond yields are nearly zero percent. Asia and Europe have taken the spotlight this week with disappointing economic reports showing weakness in their economies. Oil prices have broken below $50/barrel again. The Fed is not scheduled to purchase any mortgage bonds today, so mortgage bonds are on their own for the moment. That said, mortgage bonds are likely to continue drifting sideways and higher amidst all the market uncertainty.
What should you do about it?
Enjoy the uptick in bond prices, but be prepared to lock quickly if the market changes directions. Keep in mind that mortgage pricing quickly deteriorated the last time mortgage bonds approached these lofty levels.