Locking bias

Janet Yellen is testifying on the economy and monetary policy before the Senate Banking Committee. So far, her speech seems like a repeat of prepared speeches she has presented in the past. In talking about the job market, she stated that we are currently running near full employment. However, she notes the two recent weak job reports; but again warned against adding too much weight to a small sampling of data. She feels that job growth will continue and that inflation will move up towards the 2% target rate in the medium term. For now, the Fed seems to be taking a cautious approach to raising rates. Unless inflation jumps higher and job growth builds steam, it seems unlikely that we will see a Fed rate hike in the near term.

The clock is counting down to the final referendum vote where Great Britain will decide whether or not to remain a part of the European Union. A “Brexit”, as it has been coined, would have major implications to the US and global economies. This is a heated debate within Great Britain, with many feeling that the current system favors the wealthy and ignores the needs of the working class. Although the sentiment within the people is a moving target, current polls indicate a slight lean towards staying within the European Union. Based on the markets’ reactions to the news, it is likely that a Brexit would cause weakness within the US stock market and help push mortgage rates lower. Therefore, a final vote to stay would likely cause the opposite.

Mortgage bonds continue their downward path so far this morning, which is adding upward pressure to the APR of mortgage interest rates. We will maintain our locking bias.