Stock investors are celebrating today, as death tolls and new infection rates are slowing in Europe. Adding to the good news for stock investors, thousands of small business owners are flocking to apply for the massive government loan that will help business owners cover 2.5 months of their payroll. This is expected to add much needed cash into the hands of the small business community, which will hopefully trickle down into the pockets of workers. As long as the business owners who accept the loans maintain their payroll at current levels, all or most of the loan will be forgiven. Once these loans fund, the US economy should feel the positive impact immediately.
Mortgage bonds are currently very stable, which is a clear sign that the Federal Reserve is accomplishing their goal. My guess is that the Fed will ensure mortgage rates remain stable for some time. As market rates drift higher, the Fed has purchased adequate mortgage debt to bring rates right back down to where they want them. There is an old saying, “Don’t fight the Fed.” We are seeing why. It seems the Fed is committed to its goals regardless of what it takes. This is good news for the mortgage world which is craving stability right now.
With the Fed controlling rates, there is very little incentive to float. We will maintain a locking bias.