Bonds are moving as planned based on the prediction made in Wednesday’s market update. The improvement in mortgage bonds was sparked after bonds touched upon the two-year low level and have since improved more than 45 basis points from that low in just the last two trading days. This long overdue improvement comes after a strong drop that was fueled by the incoming President Donald Trump’s surprise victory which subsequently caused stock investors to push stock indexes to new all-time high levels. As the news settles in, and many realize that our economic outlook still has many challenges, markets will likely stabilize. This could be the beginning step of this process.
This will be a heavy news week, highlighted by GDP, Inflation data, Housing news, and Job reports. The market is anticipating 160,000 new job creations from the ADP report and 170,000 from the Bureau of Labor Statistics (BLS) report. Given the recent strength in Unemployment Claims, combined with retailers staffing up for the Holidays, these numbers could easily come in significantly higher than expectations. Therefore, we must be very careful as we move into the Job reports and consider if we wish to take the risk of floating an interest rate. Further, unless the Job data comes in weak, we can expect a Fed rate hike when they meet on December 14th.
With mortgage bonds improving, there is no need to immediately rush in to lock at the moment. However, float only if you can watch the markets closely as sentiment can change quickly.