The rapid climb higher in the U.S. stock market continues this morning, with stocks soaring into unchartered territory once more. This move has pushed mortgage bonds beneath another critical layer of support. With the 200-day moving average now not far beneath current levels, that could be the next stop. That would push mortgage interest rates another 1/8% higher if bonds fall to that level. The extended rally in stocks has certainly taken its toll on interest rates. With the prospect of lower tax rates in the future, investors are making trades now that indicate a reasonable level of optimism the tax reform bill will pass. With the battle now heating up, it will be interesting to see how this plays out.
Tomorrow’s Bureau of Labor Statistics (BLS) Job Report could pose a challenge for mortgage interest rates. The market is now anticipating 100,000 new job creations for the month of September. However, if the final report shows a weaker than anticipated number, it will likely be written off as a side effect of the hurricanes. If the report is stronger than anticipated, it will likely be viewed as a sign the job market is stronger than expected. Either way, it seems to be a no-win situation for mortgage bonds.
We’ve been in a locking position for weeks now. Once again, we will reiterate our locking bias.