Better to lock than risk the float
Mortgage bonds are slightly positive this morning, as they continue to trade just below a stiff level of resistance created by the recent multi-month highs. The stock market is close to even, as investors are still trying to digest last Friday’s BLS Employment Report. With the conflicting data of slow job growth but also a dropping unemployment rate, it is unsure which report is a providing a more accurate reflection of the current job market. With other leading economic indicators showing weakness, the market seems to be favoring the less attractive BLS Report over the strong household survey from which the unemployment rate is determined.
This week will be light on economic reports, and will likely be heavily influenced by technicals in the charts as well as bond auctions. With mortgage bonds sitting beneath stiff resistance, we will suggest a locking bias. Unless we see a clear catalyst to push bonds above resistance, we will play things safe as the risk of floating appears to be greater than the cost of locking.