Today begins an important week for the financial markets, and really for the future of our country. Most importantly, tomorrow is the day President Trump is scheduled to meet with Kim Jung Un, the leader of North Korea. Just a few months ago, tensions between the USA and North Korea were so high that many predicted an imminent military battle. Of course that fear caused stock markets to fall and mortgage interest rates benefited as money flowed out of stocks and into the bond market. Now, we are seeing this trend reverse. The prospects of peace between the two powerhouse nations are now high, which means the financial markets are moving the other way, which is not good for mortgage rates.
Tomorrow is the first day of the Federal Reserve’s two day meeting, after which the Fed will announce another ¼% rate hike. I personally think that the Fed will have a more difficult time with the next planned rate lock of 2018. Unless longer term interest rates take a step higher, the narrow spread between short and long term rates could tighten even further. Since this is a predictor of a pending recession, a failure of longer term rates rising will cause the Fed to hesitate. It will be something worth closely monitoring.
Mortgage bond prices remain in a downward trend. We will maintain our locking bias.