05 Oct Locking bias
Mortgage bonds continue their stumble lower, driving the cost of mortgage interest rates higher. Bonds are once again beneath their 25 and 50 day moving averages and are now resting on support provided by the 100 DMA. Bonds broke beneath the 100 DMA in early November of 2005 and were below that level until early January of 2017. If bonds happen to break below this level once more it will be an extremely negative sign for the direction of mortgage interest rates. Hopefully, the 10 Year Treasury Note yield will stabilize at current levels and not continue to climb higher as well. The 10 TYN yield has moved from 1.54% up to 1.73% in just four trading days. This sharp move higher has painfully pressured other bond yields higher, such as mortgage bonds. It looks like the end of the move is near. However, we will have to wait and see if that is in fact the case.
ADP reported their estimate for new job growth for the month of September this morning. The number came in at 154,000, which was below the markets’ expectations of 170,000. This move can partially be attributed to seasonal job losses as students head back to school, so it didn’t come as too much of a shock that the gains weren’t extraordinary. In fact, it was the lowest report we have received since April. For the sake of mortgage interest rates, hopefully this sets the stage for a lower report from the Bureau of Labor Statistics, which will be releasing their estimate on Friday. If it also shows softening in the labor market, we could see bonds recoup some of the losses they have accumulated the past few days.
With the direction of mortgage interest rates still moving higher, we will maintain our locking bias.