27 Feb Locking bias
Mortgage bonds continue to battle overhead resistance that has prevented mortgage rates from improving the past three weeks. Each time bonds have approached this level they have been pushed back down below it. The sideways trading pattern that is now driving the bond market was created when the Bureau of Labor Statistics (BLS) reported job growth for the month of January. This report sent mortgage rates spiking higher and led the stock market to monthly gains never seen before. With the Jobs Report for February just a week away, we will likely see continued volatility until after that report is released. A stronger than anticipated report will continue the stock market rally and push rates higher, while a weaker than expected report will bring both stocks and interest rates lower.
Gross Domestic Product (GDP) for the final quarter of 2014 was reported this morning to be 2.2%. Although it was not a stellar report, it was still higher than the 2.1% anticipated. This not too hot and not too cold reading did very little to move mortgage rates one direction or the other. However, it did create a great deal of volatility this morning, with mortgage bonds taking wide swing from one direction to the other. This continued volatility seems to be the ongoing trend. This will likely be the trend for a while….
With mortgage bonds unable to show the strength to break above resistance, we will maintain our locking bias. If bonds are able to muster the strength to make a run above resistance, we will move to a floating bias. However, as long as we remain at the top of a trading range, the prudent strategy is to suggest locking. Bonds have reached this level several times just to be pushed back, causing mortgage rates to move higher.