Are you locked? If not, you could get burned….

Mortgage bonds are trading lower on this shortened week for the markets.  Both the stock and bond markets will be closed tomorrow in observance of Good Friday, with the final bond trades of today happening at 12:00 pm MST.  As often happens in shortened market weeks, mortgage bonds are struggling.  In fact, bonds broke beneath multiple floors of support this morning, and appear poises to test the 100 day moving average, which is just 10 basis points below current levels.

The panic in the market happened following this morning’s release of last week’s Unemployment Claims,which showed that only 302,000 new claims were filed last week.  This beat market expectations of 312,000, and provides further proof that last week’s strong report of 300,000 was real and not just a once-over event.  When you consider it wasn’t long ago when weekly claims were averaging in the 350,000 range, it adds likelihood to future job growth figures showing similar strength as well.  As we have learned from the past, higher job growth leads to higher mortgage interest rates.

Given the strength in the market, we are suggesting a locking bias.  As economic conditions improve, we anticipate that we will start a gradual path of increasing mortgage rates.  In an upward trending market, there are limited benefits to floating, and great risk for failing to lock.  When rates move higher, they tend to do so in leaps, then stabilize, then take another step higher.  If floating a rate, use extreme caution or you may get burned!