Rates Holding the Line

Technicals are Driving Markets 

It has been a rather quiet week, economically speaking. There haven’t been many developments on the Iran front. In times like this, markets typically follow the “technicals.” Some compare technical analysis to reading tea leaves, but it can still be a helpful tool for identifying market trends and direction. 

MBS Technicals Guide Rate Direction 

As we have discussed, mortgage rates are set by the changes in the value of Mortgage-Backed Securities (MBS). An MBS is a pool of mortgages that is chopped into pieces and sold to investors. This way, an investor owns a piece of a large pool of mortgages rather than just owning individual mortgages. This diversifies risk and increases liquidity (availability of money), so more mortgages can be made. 

The MBS is the heart of the US housing finance system. If we look at the technical analysis of the MBS markets, we can see how it can be useful in determining the potential pathway for mortgage rates.  

A Snapshot of Friday’s MBS market 

Understanding the MBS Market: Candlestick Trends Show Rate Movement 

The red and green blocks are called candles. They represent one day that the market is open. This does not include weekends. The higher up the candle is, the better the interest rates are. Red candles indicate days when the market was down, and green candles indicate days when the market was up.  

You can see that February 27 was the best day for mortgage rates according to the chart. That was before the Iran conflict began two days later. You can see that March 27 is the worst day for mortgage rates. As you can see, markets have improved about half of the damage done since the beginning of the Iran conflict.  

Understanding the MBS Market: Moving Averages Signal Support Levels 

Another important element to point out is the wavy horizontal lines. They are the Daily Moving Averages (DMA). Each color represents a different time interval for the average: 25, 50, 100, and 200 days. The light blue is the 200 DMA. This is the average rate for the preceding 200 days. This acts as either a floor of support when above and a ceiling of resistance when below. As you can see, markets have recovered above the 200 DMA and have been bouncing off it. If markets can stay above this line, rates have a higher likelihood of improvement. 

Fed Nomination Faces Senate Delay 

In economic news, the nominee for the Chair of the Federal Reserve (Fed), Kevin Warsh, had his confirmation hearing in the Senate. His approval appeared to be on hold, as Senator Thom Tillis refused to consider it while an active investigation into the current Fed Chairman proceeded. Just as this article was being published, the Dept of Justice announced on Friday that it was dropping the investigation. This paves the way for the confirmation of Warsh. 

Pending Home Sales Beat Expectations 

Pending Home Sales, defined as signed contracts on existing homes, rose 1.5% in March. This was stronger than the market’s expectations of 0.5%.  February’s numbers were also revised up. That is despite the March rate uptick. 

Retail Sales Strong, Future Risks Remain 

Retail Sales also rose by 1.7% in March, stronger than the 1.4% expected. The Core index (excluding autos and gas), which gets plugged into GDP, rose 0.8%, stronger than the 0.2% expected. These numbers could come down in the future if gas and oil prices remain high. That could lead to demand destruction and less discretionary spending. 

Looking Ahead: Next week is Fed and PCE Week! 

• Tuesday, April 28: ADP Weekly Employment Data, Case-Shiller and FHFA Appreciation Reports 

• Wednesday, April 29: Housing Starts, Durable Goods Orders, Fed Meeting 

• Thursday, April 30: Personal Consumption Expenditures (PCE), Q1 2026 GDP First Reading, Employment Cost Index