Bond Prices Continue to Fall

Bond Prices Continue to Fall

 Mortgage bonds sold off sharply in overnight trading, creating a large gap down opening.  This caused mortgage interest rates to take another step higher, placing us at multi-year highs.  In fact, we have to go back to the brief time in 2014 to find a time when rates were higher than they are right now.  Unfortunately, looking at the charts it appears that bonds are destined to continue the path.  We can expect to see even higher mortgage interest rates in the near term.  Since bonds did experience a gap down, it is possible that bonds will actually recover most of today’s losses as the day wears on.  Regardless, the overall near term isn’t looking too great for mortgage rates. 

 After hitting fresh all-time highs in the US stock markets on Friday, stocks are down sharply this morning.  This should be helping to improve mortgage rates.  In fact, today’s economic news was for the most part bond-friendly.  Consumer inflation levels remained stable and Consumer Spending was a bit below the market’s expectations.  Given the news, the pressure on mortgage interest rates really isn’t justified.  It’s more of a continued negative technical move.

 The Federal Reserve is meeting this week and will decide if the market is ready for another interest rate hike.  This will be Janet Yellen’s final meeting as the President of the Federal Reserve.  We do not expect her to announce a rate hike at this time.  However, we do expect a hike when Jeremy Powell takes the lead in March.  Three rate hikes still seem likely.  However, if the economy continues to heat up, we could see that number rise. 

 With mortgage interest rates at multi-year highs, we will maintain our locking bias.