Locking bias

Oil prices are stronger once again this morning, which is helping stock prices climb higher as well.  Oil prices are up over 33% since February and seem to be heating up in advance of the higher consuming months of summer.  This will help the stock market which has been nearly a mirror reflection of movements in oil prices.  Since higher stock prices create upward pressure in mortgage interest rates, a climb in oil prices can also signal higher rates. 

There are no economic reports scheduled for today.  However, the news heats up as the week moves on.  The highlights of the week will be Retail Sales, Inflation Data, Fed Member Speeches and a few Auctions.  Most significant to the bond market will be Wednesday’s Consumer Price Index (CPI) release.  The last reading on the Core CPI, which excludes food and energy prices, showed an increase of 2.3% on a year over year basis.  If this number continues to move higher, this will cause mortgage bond yields to move higher, pushing up mortgage interest rates.  However, if it comes in weaker than expectations, that could help bonds improve. 

Mortgage bonds are still trading within a wide range, trapped beneath the overhead resistance level that has capped bonds from improving for the past two years.  Unless bonds are able to muster the strength to make a run above this critical level, we will maintain our locking bias.