09 Aug Locking Bias
The escalation of tension between the USA and North Korea temporarily help improve mortgage bond pricing in early morning trading today. However, that was short lived as investors quickly forgot about the potential nuclear war threats made by North Korea’s leader Kim Jong Um. Stocks are now near the flatline for the day and mortgage bond pricing is only slightly improved over yesterday’s levels. At some point, it seems likely that the US will be forced to deal with the increased threat from a rouge country who seems to dream of little more than destroying the USA. With their nuclear capabilities now believed to have the reach of hitting our land, the day of reconcile may come sooner than many believe.
There was a 10-Year Treasury Note auction today, which reportedly was met with very weak demand. The lack of investor appetite for bonds is bad news for mortgage interest rates, which are set based upon the demand for mortgage bond purchases. With the 10 YTN the closest investment to track demand for mortgage bonds, this sent bond prices lower. As bond prices fall, interest rates move higher.
With bond prices still below an important ceiling of resistance, we will maintain our locking bias.