After breaking beneath support in late trading yesterday, mortgage bonds are continuing their move lower. This move has driven mortgage interest rates between .25% and .375% higher in recent weeks. The excitement of President Donald Trump taking office has once again fueled the stock market higher, sucking money out of the bond market in the process. With the Dow Jones Industrial Average now above the critical 20,000 level for the first time in history, investors seem to have confidence that the joyous ride higher will continue. If it does, mortgage interest rates will likely be destined to test multi-year highs once more in the near term.
In outlining his plan to increase jobs, President Trump is sharing his opinion as to why the current state of the job market isn’t as strong as the numbers reflect. He sees the number of under employed as being even higher than believed. He also believes that many will re-enter the job market as soon as higher paying jobs become available. This is important to the future of mortgage interest rates. If additional jobs are created without an increased number of available workers, we will see rapid wage inflation that will likely trickle down to the consumer level. With inflation being the arch enemy of interest rates, that would certainly drive mortgage rates higher. Therefore, hopefully President Trump is accurate in his assessment.
Given the continued weakness in the bond market, we will maintain our locking bias.