Locking bias

Locking bias

As we mentioned in yesterday’s update, when mortgage bonds reach the top of a channel, chances are that they will fall shortly afterwards.  This happened today, making yesterday the best day to lock an interest rate in 20 months.  However, we are still in a longer term upward channel, so hope for continued low mortgage interest rates is certainly not lost.  When you take a global view of places investors around the world have to put their money, you will see that the US market is still providing a much higher return than many other less secure countries.  In fact, investments into US Government bonds are still considered to be the safest investments in the world.  This is driving billions of dollars out of competing governments bonds and into US securities.  This will continue to help hold mortgage rates low, as well as boost the US stock market in 2015.

Today’s ADP Report showed 241,000 new hires for the month of December.  This was slightly higher than the 235,000 anticipated and shows that job growth continues to move along at a healthy rate.  Further, November’s figures were revised 19,000 higher, which will put ADP’s report for November closer to the Bureau of Labor Statistic’s November reading.  Since that is essentially looking in a rear view mirror, it isn’t as heavily scrutinized so the market’s reaction to upward revisions is muted.  The stock market certainly liked the report, with all stock indexed up significantly so far this morning.  The 10 Year Treasury Note yield is still beneath 2%.  It will be a good sign to see if the 10 YTN yield stays below the critical 2.02% level.  If that level breaks we could easily shoot up toward the 2.2% mark.

With mortgage bonds falling from yesterday’s highs we will maintain our locking bias.  We are still near 20 month lows in mortgage rates which present a great opportunity to purchase a home or refinance a mortgage.  Mortgage bonds could easily drift to the bottom of the current channel before attempting to make another run higher.  Once the big BLS employment report is behind us on Friday, we will be able to better assess where interest rates will head in the days to come.