09 Feb Locking bias
Mortgage bonds are lower in early morning trading, capped by the Fibonacci level identified in yesterday’s update. With significant ceilings now above bonds, it will take an exceptional boost to give bonds the strength to make a move higher. Given that stocks seem poised to open higher, it isn’t likely that today will be the day that we see mortgage interest rates improve. The next floor of support for bonds sits about 40 basis points beneath current levels. Therefore, we could see pricing deteriorate further today before bonds can find stability.
Rumors out of Europe of another Greek financial crisis are starting to brew. It seems that Greece needs European creditors to release funds from a bailout that was agreed upon back in 2015 in order to make debt payments. However, investors are becoming worried and starting to demand higher returns on their money. With the International Monetary Fund warning that Greece’s debt is unsustainable and on an explosive path is adding additional reason for investors to be concerned. If an agreement is not made, we could see this crisis escalate once more. If you recall, Greece’s financial crisis created international panic, which helped improve mortgage interest rates here in the US. Should this crisis resurface, mortgage rates may once again be the beneficiary.
Once again, there remains great risk in floating. Thus, we suggest a locking bias.