Mortgage bonds are advancing in early morning trading after a nice technical bounce off the floor of support helped push bond prices higher. This move is happening despite stocks maintaining their position above the 200-day moving average; which shows the resilience the bond market currently has.
Between the stock and bond markets, stock investors are generally more optimistic than they should be, while bond investors are generally more accurate in predicting economic change. It seems that stock investors continue to show optimism, as is clearly evidenced by a greater than 8% return in the first six weeks of 2019. In the meantime, bond prices have shown stability, with interest rates dropping to levels very few economists believed they would. I continue to maintain my belief that rates will be even lower than they are now in the future. This doesn’t mean I don’t believe people should refinance now if there is a savings. However, I only suggest a no cost refinance so that homeowners can take advantage of future rate drops if or when they occur.
Today is a big day for the trade war, with talks scheduled to take place today between the U.S. and China to make steps toward coming to an agreement. As news of the talks are released today, we could see volatility increase in the bond market. Generally, this is good news for stocks and not good news for mortgage bonds, so keep that in mind if you are currently floating an interest rate.
There is a little room for mortgage rate pricing to improve. If you choose to lock, do so only if you are able to maintain a close eye on the market.