02 Nov Lack of data to drive markets today, so we will maintain our locking bias.
Mortgage bonds remain trapped beneath their 200 day moving average, so far not showing the power or conviction to get back to levels they achieved prior to last week’s Fed statement. Pushing through the 200 DMA may not be achievable early this week, as many investors will remain on the sidelines as they await Friday’s update from the Bureau of Labor Statistics (BLS). Friday’s Jobs Report will show the number of new jobs created in the month of October. Since both August and September’s reports were significantly below expectations and given that we are moving into seasonal employment months, this report could easily beat expectations of 190,000. The market is also expecting the Unemployment Rate to drop from 5.1% down to 5%.
Mortgage bonds are also battling a rising 10 Year Treasury Note Yield and a seemingly unstoppable stock market. Both of these are creating significant headwind for mortgage interest rates. If the 10 YTN yield maintains its position above current levels, we will likely see mortgage rates move higher in the near term. This is not a welcomed sign to winter homebuyers who have been hoping for lower rates to help soften their payment. We will have a better idea after Friday’s BLS report, which could also hold the key as to whether or not the Fed will raise rates before the end of the year.
Given the lack of data to drive the markets today, we see little hope of bonds making much improvement from here. Therefore, we will maintain our locking bias.