Rising Geo-Political Risks Help the Bond Market

Escalating tensions between the United States and Iran dominated the headlines over the weekend.  Following the killing of an Iranian general, Iran is seeking retaliation. To begin with, Iran has once again fired up their nuclear perforation and development operations, which is a great threat to many nations. Although such news would generally send mortgage interest rates Spiraling lower, mortgage bonds remain trapped beneath the critical ceiling that has been in place for a number of months now. Given the geo-political risks, I believe there is a strong probability that mortgage Bonds will eventually break above this level of resistance. If the stock market continues to fall, we can expect an ongoing flight to safety which will boost bond prices and help add downward pressure to interest rates.With mortgage rates near historical lows once again, it is a great time to consider a refinance to lower your monthly payment or to consolidate debt.

It’s jobs week, with ADP schedule to report their estimate on new job creations in the month of December on Wednesday and the Bureau of Labor Statistics (BLS) scheduled to announce their estimate on Friday. Current estimates call for approximately 160,000 new hires, which I personally believe is an optimistic number. Outside of retail job creations, much of the business world seems to slow down in December as people focus on holiday activities and family time.  I was surprised at how many employees were laid off during the season, which seems to point towards a weaker number.  It will be interesting to see what happens.

Mortgage bonds remain just beneath a critical ceiling of resistance. Unless bonds are able to break this level, the rule is to lock.