Locking bias

So far this morning, stocks are recovering some of their recent losses and bonds are suffering as a result.  There are limited economic reports slated for today.  However, there is a 10 Year Treasury Auction at 11:00 am MST that could set the tone of the market in the near term.  If the results show a low level of demand, bond prices could be pressured lower, which will add upward pressure on mortgage interest rates.  Given that we are now only 7 days from the highly anticipated Fed Funds interest rate increase, there could be many who sit out on the sidelines, unwilling to place significant bets on the market just before a rate hike.  Watch the market closely as the results are announced.

The Mortgage Bankers Association released their purchase mortgage application data for the week ending 12/4.  The purchase index showed an increase of just 0.04%, which was basically flat.  However, purchases are up 29% from this same time last year.  The strength in the purchase market has largely been fueled by strong levels of home value appreciation which seems to cover up a lot of potential challenges.  For example, not that home values are stronger, the rate of homes in foreclosure or at least with delinquent mortgage balances is lower than we have seen since before the housing crisis.  That is all good news for the economy and the future of the housing market.

Mortgage bonds have broken beneath support of the 25 day moving average and are now trading within a tight range.  We will maintain our locking bias.