Locking bias

Mortgage bonds have officially lost the entire benefit they received following Friday’s weak reporting on job growth in the US during the month of March. 
Bonds are heading lower again this morning, as they follow through on yesterday’s losses.  This is mainly due to strength in the stock market
which is causing investors to sell bonds for the higher returns currently offered in the stock market.  The 10 Year Treasury Note is also creating
a headwind for mortgage interest rates, with the yield moving higher and breaking through the downward channel it has been riding.  The continued
upward pressure on interest rates could very well continue until the release of the Federal Reserve Open Market Committee Meeting Minutes which will
happen tomorrow.  Investors will be looking for any indication as to when the Fed will begin to push interest rates higher. 

Minneapolis Fed President Narayana Kocherlakota said this morning that in light of the outlook for low employment and low inflation, the Fed can be both
late and slow in raising interest rates.  In addition, yesterday, New York Fed President William Dudley made dovish comments and said it would
be difficult to raise interest rates in the short term.  Although this would typically help improve the bond market, their words did little to
slow the losses.  As of late, it seems to be all about the stock market where ‘bad news is good news’ to investors.  Any delay in the rise
of short term interest rates is viewed as a positive for the stock market, which is draining money from the bond market. 

With mortgage bonds breaking out of their upward channel, we will maintain a locking bias.  Watch the stock market closely.  It is trading in
a wide range and could move in either direction.  If weakness develops in the stock market, it will likely help improve mortgage bond pricing. 
However, if the upward momentum in stocks continues, we will likely see upward pressure on mortgage interest rates.