In case you were on vacation Friday, there was a huge sell-off in the bond market.  This was caused by newsthat a plan would soon be announced to "bail out" AMBAC, a huge bond insurer.  We would hope, that after such a crushing blow to rates that we would get some relief this week.  So far, not so good.

The only scheduled economic report for the day, Existing Home Sales, was released just now.  And even though the number did fall as expected, it was less of a fall than analysts thought: 4.89mil versus 4.84mil.  Immediately after the data, mortgage bonds worsened and are continuing to fall.  The home sales news is not the only factor driving bond prices down, and this report is normally not considered of great importance to rates. 

The fact that it is impacting rates this morning speaks to the market sentiment.  There are hope and optimism surrounding the AMBAC announcement.  The market is latching on to any positivity it can find. 

The rest of the week has a good amount of data that could help bring rates down again, but strength in the data will surely cause rates to continue to skyrocket (remember that weak data, in general, is good for rates).

As I finish typing this, prices are down between 14 and 21/32nds which should be good for about a .5 decrease in YSP on this morning's rate sheets.  Some lenders that already released will be considering repricing for the worse if the losses hold.

It's always risky to float when the market is showing signs of optimism.   On a technical read of the data, prices have pulled well above the moving averages.  As we move along the 50 day moving average, bond prices have "bounced" up and down off of the 50 day line.  If "the trend is your friend," then we will actually have some improvement in rates some time in the next two weeks.  Remember that a technical read of the data, though, must always be considered with economic data.  We have the new introduction of inflation concerns.  This could be the dark horse that ruins our nice upward trend on bond prices.  We'll have to keep a sharp eye on inflation data and news.  If it moderates in severity to any degree, this will be good for rates.  Lock/float is a 50/50 shot this week.  The technical data favors floating while the economic buzz favors locking.  So I hesitate to give an opinion as I am undecided myself.  If I had to take a stand, I would say float until the economic reports this week give us some insight on the validity of the trend.  If you can't afford to take that risk, then don't.