The Head & Shoulders pattern in the bond charts yesterday proved to accurately predict a move lower. Mortgage bonds are now matching the lows we saw in early June, which were last seen nine months prior. With bond prices continuing to fall, mortgage rates appear destined to continue their path to push higher. It may take a Federal Reserve rate hike to slow the increase of mortgage interest rates. At this point, the market is anticipating a Fed rate hike in September. That is two Fed meetings away and gives bonds a lot of time to continue in panic mode. With the best executed mortgage rate on a conventional mortgage loan now at 4%, there is certainly room for rates to continue moving higher.
Today is a quiet economic news reporting day, so bonds will trade heavily based on the technical picture once again. The back and forth news out of Greece with their on again off again debt restructure deal is becoming old news. At this point, the news seems to only hurt the bond market vs ever help boost the bond market. Next week we will have the all-important Bureau of Labor Statistics (BLS) Jobs Report, outlining job growth for the month of June. Given that it is the first official month of summer, and the first month after kids getting out of school for summer break, we anticipate it will be a strong report. Therefore, mortgage rates could be in for another move higher.
The environment for floating an interest rate continues to be extremely risky. Most borrowers who have chosen to float the past several weeks have been burned by higher interest rates. We will maintain our locking bias.