Short term locking bias

After a strong push higher, mortgage bonds are taking a breather this morning.  As for the stock market, stocks are close to flat this morning after suffering deep losses yesterday.  After falling through a critical floor of support, the 10 Year Treasury Yield came within a whisker of the next floor of support.  Although not likely it will happen today, we are hopeful that the yield will make another attempt at some point in the near future to make a break beneath.  That would again be very bullish for mortgagebonds, helping keep interest rates at the lows of 2014 that we are currently experiencing.

New Housing Starts for April were reported to be up 13.2% at 1.072M units.  This was better than estimates of .98 M, and also stronger than last month’s .946M.  Building permits were also reported higher, increasing 8.8%, matching the fasted pace since June of 2008.  This is a healthy growth rate to support a steady rate of appreciation, without creating a flood of extra homes on the market.  Long-term, that is a healthy position for our economic growth and sustainability.

Consumer Sentiment for May was reported at 81.8.  This was below the expectation of 84.5 and was also lower than last month’s reading of 84.1. Heading into the warm months of summer, it was surprising to see this come in below expectations.  As confidence grows, people are more willing to spend money and hire.  This was not an encouraging sign for our economy.

With mortgage bonds failing to break the next barrier, a locking bias is warranted for short term transactions.  However, for those who have time to close, and the stomach to float, there is a chance that mortgage bonds will make another run higher.  As always, if you choose to float, watch the markets closely.  This is a volatile market and direction can change quickly and without notice.