18 Dec An Ugly Technical Outlook for Mortgage Interest Rates
Stocks are slightly higher once again, driving mortgage interest rate pricing higher in early morning trading. From a technical perspective, mortgage interest rates are more likely to move higher than to make significant improvements in the near term. This negative technical outlook has been in play for a number of weeks and is the reason we have maintained a locking bias as long as we have. Even when indicators point towards improvement in the bond market, they are short lived and the gains are minimal. Unless the markets get negative news that is significant enough to allow bond prices to break above the many layers of overhead resistance above current levels, we can expect to see rate just get worse over time.
As we approach the end of the calendar year, many institutional mutual fund managers will be forced to make adjustments to their portfolios to get their holdings in line with the stated investment class mixtures their perspective funds have agreed to. After a time of massive growth in the US stock market, many mutual funds are likely holding excessive stock balances in their portfolios. If so, many fund managers will be forced to reduce their stock holdings and reallocate funds into cash, bonds and other assets to be within compliance. Such moves would help support the bond market when the rebalancing occurs.
There remains little reason to float. Therefore, we will maintain a locking bias.