We can carefully float here

Mortgage bonds bounced higher this morning, breaking out of the downward channel that has prevented mortgage rates from improving.  This was welcomed news for bond holders, as the bulls won the battle we discussed in yesterday’s market update.  The floor of support that bonds tested once again yesterday has proven its strength and has set a ceiling on how high interest rates have been.  As long as that floor continues to provide support, we will see favorable mortgage interest rates.  Given the low inflation and stagnation forming in segments of the US economy, we could see the low rates hold steady for a while.

Initial Jobless Claims for the week ending 12/26 were reported at 287,000.  This represents an increase of 20,000 from the prior week’s report of 267,000 and was 17,000 higher than expectations of 270,000.  This was the highest report we have seen since July, and came over the week of Christmas.  Since it’s not considered “politically correct” to lay off just before Christmas, this comes as a bit of a surprise.  Many companies hold off until the holidays are over before letting go of excess employees.  We can expect to see higher reports in the coming weeks as seasonal jobs come to an end.  Overall, the job market is still strong and many of those claimants will soon find new employment.

The bond market will close early today and will be closed all day tomorrow in observance of New Years.  There is no immediate need to rush in and lock, as trading in the bond market will be slow today.  As long as pricing holds, you can go ahead and carefully float.