LOs should prepare their clients for some March Madness in interest rates

Mortgage Bonds are starting March dead on a floor of support as Stocks soar to fresh all-time highs (currently up 311 on Dow to 21,114).

The culmination of economic optimism, prospects of lower taxes/lower regulation, increase in inflation expectations and a surge in Fed Rate hike expectations for March are threatening to push Mortgage Rates to the highest levels in years.

The chart below shows prices do remain in a wide 100bp range - but are now sitting on the bottom of that range, as defined by the lower Red horizontal line. Should prices fall convincingly through this floor - it would not be good. The Bond has not closed beneath the $101.84 level this year, so if that event comes to pass, we will likely see rates move a leg higher and in a hurry.

Some things to think about...it is encouraging to see prices hold above support in the face of so much unfriendly Bond news. On a potentially positive note, we could very likely see Bonds pivot off this support and start heading towards the upper-end of the trading range, as defined by the Green arrow.

Finally - have clients follow 2.60% on the 10-Year yield - since they can't track Mortgage Bonds. A break above that yield would be very negative and likely send yields to 2.75% and higher.