Bonds Prepare for a Big Week Ahead

Although today is a relatively slow day for scheduled economic reports, the week overall is an important one for mortgage bonds. Several key reports will be released that will heavily influence the near-term direction of mortgage interest rates, including a Fed meeting, employment reports, housing news as well as reports on consumer inflation.

The Federal Reserve’s two-day meeting will begin tomorrow morning, with the interest rate and policy decision due at 12:00 pm mountain time. We don’t at all expect the Fed to raise interest rates. In fact, as we have been saying for many months, we feel there is a chance we will see rates drop in 2019, and/or a change to the Fed’s balance sheet reduction plan. Either of which would be good news for mortgage interest rates, which have risen sharply since the Fed started the path of higher rates.

After hitting up against the strong ceiling of resistance on Friday, stocks have once again retreated. Today’s move lower is very much a technical one and is a good sign for mortgage interest rates. If stocks do break above this ceiling, we could expect rates to inch higher. However, if this level holds, we should see stability at current levels.

I see very little potential benefit of floating for those needing to close in the coming days. In such case, we will maintain a locking bias.