20 Jan Locking bias
Mortgage bonds continue their downward path, as markets prepare for today’s transition of power. The bond market seems unsure as to what the world will be like under a Trump presidency. With many of the stated goals and objectives based around adding more jobs to the US economy, the bond market has reasonable reason for concern. Given the current number of US participants in the workforce, we are already near what the Federal Reserve considers “full employment.” Therefore, the only way to expand the number of jobs available is to increase the Labor Force Participation Rate. This would require workers added from current government dependence and some to come out of retirement. Otherwise, an abundance of jobs would over inflate wage pressures and drive inflation higher.
Outside of today’s presidential inauguration, there is very little news slated. Next week will bring important economic news, primarily Friday’s report on GDP. Further, it will be the first full week of a Trump presidency. President Trump made many promises to the American voters as to what he will focus on in his initial days of being in office. Therefore, we can anticipate a heavy influx of news as the transitional changes begin. This could cause continued volatility in the bond and stock markets. Therefore, we anticipate mortgage interest rates to continue to move higher in the near term.
With bonds still falling, we will maintain our locking bias.