Good News for the Stock Market, Bad News for Interest Rates

Stocks are higher and mortgage bonds are once again losing ground today, as the US and EU announce a trade agreement that will help to de-escalate the ongoing trade war concern. The two economic powerhouses agreed to expand European imports of US liquified natural gas and soybeans and lower industrial tariffs on both sides. In addition, it was agreed upon to “hold off” on other tariffs while negotiations proceeded. This is a big step in the over-all trade negotiation plan headed by the Trump Administration and could give the stock market the boost it needs to challenge new all-time high levels.

After breaking beneath a multi-week trading channel, mortgage bonds are now beneath all their important moving averages. This is posing a significant challenge for mortgage interest rates, as bonds will need to break above each of these to see mortgage rates improve. That would require significant negative economic news, which may not be coming for a while.

Without any real reason to float, we will maintain our locking bias.