18 Sep Locking bias
Stocks are setting new all-time high records again this morning. Given that there is very little for stock investors to be celebrating, this improvement is largely a continuation of the improving momentum. This is again putting upward pressure on mortgage interest rates, which have had a rough couple of weeks. If the yield on the 10 Year Treasury Note steps up to the 2.25% level, we could be in for a more dramatic increase in interest rates. With current levels at 2.225%, there isn’t much room before yields hit this critical level. Considering that yields were at 2.03% less than two weeks ago, it’s easy to see why mortgage rates have also moved higher.
The Federal Reserve will be meeting this week, with the interest rate and policy announcement set for Wednesday. Although the Fed will not increase short term interest rates, it will likely be the point at which Quantitative Tightening will be announced. Although the Fed will now be an active seller of mortgage bonds, they will not be reinvesting all the income they have been putting back into the bond market. This will reduce the demand of money going back into the bond market, which will help drive the price of mortgage bonds lower. This will create upward pressure on mortgage interest rates, making now the time to either purchase or refinance.
We are hopeful that the 50-day moving average will hold. However, we will continue to maintain a locking bias.