Going Out on a Limb: Looking For A Small Bond Rally

What a difference a week makes. Several big rally days in the stock market and everyone is calling a bottom. The financial stocks are celebrating like the worst is over and unexpectedly, the bond market has held up well. While I don't expect a huge rally in the bond market, I am seeing technical signs that the stock market will retreat soon and send investor money back into the safe haven of bonds. I still expect a trading range for bonds until the fall.

The competing themes will continue to be money flowing into bonds for their safety VS. money leaving bonds because of the increasing supply and fear that the multi-decade rally in bonds will be the last bursting bubble.

I am seeing increased purchase activity as rates stay under or close to 5% and home prices are perceived as attractive. I foresee rates staying at these levels for the time buying, esp. since the FED has stated he will buy longterm bonds if needed to keep mortgage rates low. He has no other way to keep rates down since they have already cut overnight lending rates to zero.
Refinance activity has been strong as well as clients are realizing that these rates are exceptional. I continue t0 advocate locking in these rates at these levels.
Although pessimism about the economy and housing still persists, I am seeing more buying interest and customers calling to prequalify. First time home buyers and financially secure move-up buyers are seeing the current situation as a great opportunity. Agents should use this time to pursue marketing strategies and prepare for these active buyers.
I am changing my outlook on the bond market. I previously expected an exhaustion rally sometime this spring before seeing rates rise. I am considering that further economic weakness in the fall may lead to the timing of a final bond rally in that time frame.
The implications of having lower rates for most of the year will have a positive effect on the purchase and refinance markets.