Fears Grow in China

Fears over the longer-term impact of the Coronavirus are causing China’s stock market to fall hard once again today.  However, the stock market here in the US is so far pointed higher in premarket trading.  This could of course change as investors weigh the risks associated with troubles in China and the impact that will have here in the U.S.  As the illness spreads, consumers will become increasingly confined to their homes, opting not to go out to stores or restaurants and risk getting infected.  In turn, resulting in an economic slowdown.  However, the degree to which this will happen is currently unknown.

Mortgage bonds continue to hold their ground, maintaining near multi-year low mortgage interest rates.  However, after hitting key technical levels, mortgage bonds are likely to move lower, adding slight upward pressure to mortgage interest rates.  As the week goes on, we will have several key economic reports that could help bond prices move higher.  Most importantly, on Wednesday we will get ADP’s estimate of new job creations in the month of January and on Friday we will receive the more important reading from the Bureau of Labor Statistics (BLS).  If these reports happen to show that the pace of the job market expansion is slowing, mortgage rates could improve.  We will keep you updated.

Given that mortgage interest rates are now near all-time lows, we will maintain a locking bias.  Now is a great time to lock in a rate.

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