Mortgage Rates Sharply Higher

Stocks are taking a beating once more, officially ending the longest bull market in history.  This morning’s market is rumored to be influenced by confusion over travel restrictions from last night’s speech by President Trump, as well as unclear direction from the Trump administration on how they plan to financially stimulate the market.  Further, President Trump is publicly criticizing Fed Chairman Jerome Powell, stating that he would like to replace him if he can.  This creates uncertainty in the markets, and overall has not been taken well by stock investors.  The Fed is widely expected to cut rates once more when they meet next week.  Hopefully that will satisfy President Trump and allow the two to mend their relationship.  That would be healthy for stocks.

There remains a total disconnect in the markets between stocks and mortgage bonds, as well as the 10-Year Treasury Note and mortgage bonds.  As a result, we are having many people expecting to see rates move lower, only to discover that rates have moved sharply higher over the past few days.  Even today, the yield on the 10-Year has dropped sharply, yet mortgage interest rates are about 1/8% higher than they were yesterday.  Since the two yields typically trend in the same direction, this is difficult to explain.  However, it is heavily influenced by refinance risk and the markets not willing to drop mortgage interest rates because they are losing money as loans are being paid off quickly.  This has been one of the sharpest moves higher I have experienced in my 23 year career.  Hopefully markets will settle and we will see stability in the near future.

We will maintain our locking bias.