Mortgage bonds continue to drift lower as they search for a floor of support strong enough to stop the fall. The rapid fall in mortgage bond pricing has driven mortgage interest rates between 1/8% – ¼% higher in the past few days alone. The stock market is finally weakening, giving back some of the dramatic gains made over the past few days. However, even the force of stocks falling is not sufficient to stop the bleeding in the bond market. We are hopeful that bonds will find stability soon. But of course, it’s difficult to predict a floor for bond pricing when markets are changing as quickly as they have this week.
Oil prices tumbled to a three-week low as record crude stockpiles threaten OPEC’s efforts to drain a global surplus. This would generally be viewed as deflationary, helping to drive mortgage interest rates lower. However, given the overall optimism tied to the Trump Presidency and the policies his Administration plans to implement, the bond market seems to be ignorant of the potential improvement this should have to mortgage interest rates. We must see if stock piles continue to climb or if this is just a temporary blip higher.
Given the continued weakness in the bond market, we will maintain our locking bias.