Bond Prices Holding… For Now

Mortgage bonds are holding their ground today, which is great news for mortgage interest rates. After hitting 7-year highs last week, rates have improved slightly. This is likely a retracement Improvement before mortgage interest rates take another step higher. This will be heavily influenced by Friday’s Bureau of Labor Statistics (BLS) report. If it shows that job growth in the month of September was stronger than expected, we can expect rates to climb immediately following the report.

Fed President Jerome Powell spoke today, saying that he anticipates the path of gradual rate hikes to continue. It seems clear that the Fed is committed to maintaining a reasonable level of inflation without allowing the economy to get to heated. Although the Fed has already met their 2018 goal of 3 rate hikes, the odds of one more rate hike in the month of December are relatively high. Combined with the continued reduction of the amount of bond purchases, the tightening mode is in full swing. Eventually, this will catch up to the stock market and create a headwind that will force stocks lower.

Although bond prices are holding, odds of significant improvement are minimal. Therefore, we will maintain a locking bias.