Locking bias

After touching the overhead resistance, we have been discussing in recent updates, mortgage bonds have lost some ground.  Yesterday was a significant day in the markets, with the 10 Year Treasury Note yield touching a low point not seen since November of 2012 of 1.54%.  This is not too far above the all-time low of 1.38% hit in July of 2012.  After hitting 1.54%, yields jumped higher.  Further, stocks touched exactly on lows of the past two years before bouncing higher.  With all three markets touching multi-year levels, this could very well be a turning point where stocks begin to improve and mortgage rates begin to worsen.  Based on the follow-through in today’s trading, that appears to be the case. 


Retail Sales for the month of January were reported this morning to be +0.2%, which was in line with estimates.  Retail Sales excluding autos were +.01%, which was also in line with estimates.  Additionally, December’s report was adjusted upward by 0.1%.  This was a solid reading overall, and shows a nice bounce-back from the recent slowing trend.  Given the importance of consumer spending, this is an important number to watch, and one that greatly influences GDP. 


Crude Oil prices rebounded a bit yesterday, following rumors that OPEC would cut oil production.  This also falls on the heels of oil hitting lows not seen since 2001.  Assuming prices move higher from here, this will add upward pressure to both the stock markets as well as mortgage interest rates. 


Given the signs of a reversal in the markets, we will maintain our locking bias. 


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