After an afternoon rally in the bond market on Friday afternoon, mortgage bonds opened the day in negative territory to begin the first trading day in the month of March. Stocks, on the other hand, are blasting higher and are again at new all-time record highs. The seemingly unstoppable run higher in the stock market continues to be the primary culprit driving mortgage interest rates higher. As both markets are competing for the same investment dollars, interest rates tend to move higher in times when the stock market is pushing higher. Unless the stock market pulls back, a significant run higher in the bond market will be unlikely.
Bond friendly economic news continues to hit the wires. However, it is doing little to help improve mortgage interest rates or to stop the stock market from setting new record highs. January Personal Income and Spending was reported this morning. Personal Income was up 0.3%, which was a bit lower than the 0.4$ expected. Consumer Spending was reported to be -0.2%, which was also lower than the 0.0% expected. Since economic growth is all about what consumers are spending, this report is not showing growth in our economy. This should have created a headwind for the stock market and helped improve mortgage bonds. However, the trend is just too strong for this to slow the growth in stocks and the headwind bonds have faced for the entire month of February.
With mortgage bonds continuing to be held beneath their 50 day moving average, we will maintain our locking bias. This Friday we will receive the monthly job growth report for the Month of February from the Bureau of Labor Statistics. This will likely add additional volatility to the bond market. With the potential of the depressed oil market creating downward pressure to job growth, we may see a lower report. However, in this unrealistic environment, anything is possible.