Locking Bias

Mortgage bonds have maintained the same general level for approximately one month.  It seems that good days are balanced with bad days, with the general direction not in favor of lower rates.  The lack of ability for mortgage rates to improve has greatly been due to an over exuberant stock market.  As stocks improve, mortgage rates generally deteriorate.  The momentum of growth in the stock market has slowed the past few trading days, with signs of indecision and risk showing in the stock market charts.  Has the rally finally capped?  It appears that may be the case.  If so, that is a good sign for mortgage interest rates.

Retail Sales for the month of October were reported up 0.3%.  When stripping out autos and gasoline, Retail Sales were up 0.6%!  Both of these were stronger than market expectations of 0.2% and 0.5% respectively.  This was a strong report and shows that our economy continues to expand.  Further, Consumer Sentiment for November rose to 89.4, which is the highest reading since July of 2007.  This was much stronger than expectations of 87.5.  This shows that consumers are feeling better regarding their financial situation and attitude about the economy.  However, it is interesting to look back on what was around the corner the last time consumers felt this confident.  It wasn’t long after that our economy was in dire shape.

Mortgage bonds are making a bit of a run this afternoon however, they are still below significant resistance.  If they are able to make a break higher, we will hopefully be able to shift to a floating bias.  Until that happens, the safe play is to lock.  The general trend has been higher rates, so the benefit of floating is minimal at this time.