23 Oct Locking Bias
The stock market continues to claw its way back up with vengeance. With the exception of having struggles advancing yesterday, the S&P 500 has made consistent advances higher the past six trading days, including setting new records for annual daily advances. In fact, it has gained more than 100 points in this time frame. Surprisingly, the damage to mortgage interest rates has been minimal. With the stock market gains we have seen recently, we would expect to see more damage to the bond market, pressuring mortgage interest rates higher.
Initial Unemployment Claims for the week ending 10/18/2014 were reported at 283k. This was an increase of 17k from last week’s number. Although there were only 285,000 claims anticipated, this beat expectations by 2k. Since this is the sample report that will be used by the Bureau of Labor Statistics for determining Job Growth for the month of October, this strong figure suggests that we will see a healthy growth rate in new hires. We would anticipate a figure in excess of 200,000 based on the strength of this report.
Mortgage rates have been under significant pressure, but have been held up by support. If support fails to hold, we will likely see a much stronger drop in the bond market, pressuring mortgage interest rates higher. In light of the dynamics in the market, we are going to maintain our locking bias. It is highly unlikely that we will see any significant growth in bond pricing until the stock market at least stabilizes. The rate at which it is currently moving higher is not sustainable for long, so we will hopefully find stability in the bond market soon.