After again being at the peak of multi-month highs, mortgage bond pricing is down as anticipated today. Yesterday’s mortgage interest rate pricing matched the best levels we have seen since early November of 2016. This level has been tested now eleven times in recent months and has each time proven to be formidable. Therefore, it was an easy prediction yesterday to suggest a locking bias. It would likely take an economic or political disruption to help bonds improve above this critical point. Given the significant political volatility and potential for an economic recession in the coming months, we will likely eventually get above this level. However, there is no guarantee and the timing of such a move is unknown.
The stock market is climbing significantly higher so far today, as investors see an opportunity to take advantage of the lower stock prices available after last week’s sell off. With the bond market hitting multi month highs, smart stock investors know that money will now likely flow out of bonds and into the stock market which will help improve investor profits in the near term.
Although volatility in the stock market has escalated, market dips have immediately been followed by strong days. This is a dream market for speculative investors and day traders who can profit by strong moves in either direction. However, an increase in volatility can also be a sign of weakness in the markets ahead. Therefore, it much be watched closely.
With bond prices failing to break above the current ceiling, we will maintain our locking bias.