Expecting Rates to Worsen

Financial markets were closed yesterday in observance of former President George H. Bush. However, the day prior to the market’s closing was a horrific one for the U.S. stock market.  The downward momentum is continuing so far this morning. However, there appears to be a light at the end of the tunnel. Stocks are now approaching a low that has continually held for more than one year. Further, mortgage bonds are now approaching their 200 day moving average. Since they have not breached this level in well over a year, it is unlikely they will be able to break above this critical level on the first attempt. Clearly, this means we expect to see the stock market improve in the near term and upward pressure added to mortgage interest rates. Will the improvement last?  There has been so much volatility in recent months. I see the level of volatility continuing, which will be helpful for the longer term outlook of mortgage interest rates. So while I see a breakthrough coming, don’t expect that to occur immediately. It will take time.

We are going to switch our stance back to a locking bias.