08 Aug Mortgage Bond Pricing Heading Lower
The scenario outlined in yesterday’s market update came to fruition this morning, with the stock market hitting new all-time highs and mortgage bond pricing heading lower. It seems that the ceiling of resistance was just too great a barrier to pass. Unless stocks slow down their pace, we can expect for mortgage rates to stay at current levels or deteriorate even further from here. However, with interest rates near multi-month lows, this is still a relatively great time for interest rates. Given the overall market consensus that was released earlier this year, mortgage interest rates were expected to be significantly higher than they are currently. This has helped the summer home purchase market, as people have been able to take advantage of a lower than anticipated house payment.
Many large asset managers are starting to “head for the exits,” believing that we have had too much of a good thing in the financial markets. Commonsense would tell us that this bull run in the stock market cannot last forever. However, many investors continue to behave as if this will last forever. It seems that it has become a reckless market in which to invest. Although things may continue for quite some time, the writing is certainly on the wall.
The NFIB small business optimism rose 1.6 points in the month of July, which was stronger than originally anticipated. Within the report, the strongest component was “Plans to hire”, which rose to 19%, making this the strongest report in 14 years. However, the challenge in the report points to a lack of available labor to fill needed positions. The key to making the current economy thrive will largely depend upon the labor force participation rate, which has remained low. If we can get more Americans back into the workforce, our job market would flourish
Given the weakness developing within the bond market, we will maintain our locking bias.