Mortgage bonds are flat on the day so far this morning. The strength of the stock market continues to be the greatest threat to mortgage interest rates today. With the DOW just beneath the 20,000 mark, it seems likely this level will be broken soon. However, so far this morning stocks are down. If they build steam as the day progresses, that would create a headwind for bonds that could cause them to fall lower and put upward pressure to mortgage interest rates.
Bonds could sure use a break from the downward channel that has pushed mortgage rates to multi year highs in recent weeks. Again, it isn’t likely this will happen until we see the fire dim in the stock market. Today’s news was primarily focused on the housing market. Of course, Housing is strong so even glimpses of weakness are widely overlooked. Later in the week we will get a reading on consumer inflation via the Fed’s favorite gauge, the Personal Consumption Expenditures (PCE) report. If inflation is stronger than expected, bonds will certainly take a hit. This is an important crossroads in the market. Hopefully bonds will be able to hold their ground.
Until bonds show signs of greater strength, we will maintain our locking bias.