19 Sep Locking bias
This is Fed week, so we can anticipate the volatility within the stock and bonds markets to continue. The formal rate announcement will come Wednesday afternoon. Don’t expect rates to be moved. However, the market will certainly be listening intently for comments associated with the announcement. Be prepared for the Fed to state that economic conditions continue to improve and that they see the job market continuing to move towards full employment and inflation creeping closer to the Fed’s target rate of 2%. They will certainly leave a rate hike as a strong possibility before the end of 2016.
Stocks are moving higher once more, recovering losses from Friday’s trading. Stocks are getting some of their strength from this morning’s NAHB Housing Market Index, which is a real time gauge of builder confidence. It came in at a reading of 65, which is much higher than the markets’ anticipated reading of 60. It also matches an 11 month high, which was the highest reading since 2005. Housing continues to be a shining spot in the US economy and should continue to be strong for the foreseeable future. This is great news for those looking to buy their first home now. Combined with low interest rates, we are set for a continued strong housing market.
Mortgage bonds are now flat, trading in the middle of a wide range. With more room for bonds to fall lower relative to opportunity to trade higher, we will maintain our locking bias.