18 Aug Locking bias
After touching near multi-month high levels yesterday, mortgage bond prices are falling. As we’ve mentioned in many of the recent updates, bonds were at levels not surpassed since early November of 2016. Therefore, yesterday’s interest rate sheet was about as attractive as we have seen in over nine months. With the stock market now once again moving higher, we are seeing money flow out of the bond market and into stocks.
Today’s jump in stock prices seemed to be fueled by President Trump’s announcement that he plans to fire Chief Strategist Steven Bannon. Rumor has it that Bannon was given the option to resign but was forced out in the end. He clearly upset Trump with recent comments regarding North Korea that contradicted President Trump. Since that event, it has been speculated that this move would happen.
Overall, the Trump Team has experienced a great deal of change. Although this would generally cause the stock market to stumble, this move seems to have be taken positively by the markets. Bannon was one of the more controversial members of the team. Therefore, his departure could add more stability.
Given the lack of strength within the bond market to break above multi month highs, we will maintain our locking bias.