Mortgage Rates Continue to Climb

Stock markets around the globe continue to recover.  Here at home, the S&P 500 has formed a nice upward channel the past few days and is now looking to climb above its 50-day moving average.  A break above this level could set the stage for a total comeback where stocks have regained all the ground they lost during last week’s market correction.  It seems clear that investors are feeling more confident and ready to pour money back into the market.

An increase in the supply of oil reserves has once again pushed prices lower in recent days.  With a barrel of oil now sitting at about $60, this is good news for inflation.  If prices can move down to the $50 or so range, that would be a sign that higher rates of inflation may not be possible.  Since oil is a major expense in the production and distribution of consumer goods and services, lower oil prices help reduce the prices consumers pay.  That would be good news for mortgage interest rates, as the recent climb has been influenced by fear of higher consumer inflation.

The downward channel continues in the bond market.  After hitting the bottom of the channel again yesterday, mortgage bonds are now climbing higher.  This bounce from the top of the channel to the bottom has been ongoing for many weeks now.  Since the channel is heading lower, the mortgage interest rates have been climbing higher.  There’s no real way to say at what point this will stop.

Until bonds break out of this brutal channel, we will maintain our locking bias.