07 Dec Not a lot of movement today
There isn’t a lot of market moving economic data planned for release today. Therefore, markets will trade heavily based on the technical picture. We are a bit over a week out from experiencing our first Federal Reserve rate hike in 9.5 years. This is increasing volatility in both the bond and stock markets, as many investors are unwilling to make significant bets on either market until they are assured of a more reliable path forward. Both the 10 Year Treasury Note and mortgage bonds are currently trading in channels with very strong support levels. Hopefully these will hold and prevent mortgage interest rates from taking a step higher in light of wide market movements.
The imminent increase in short term interest rates has many wondering the impact this will have on the mortgage interest rate market. With media hype continually spewing inaccurate information, many believe this will force mortgage rates significantly higher. However, that isn’t necessarily the truth. A look back on the last time the Fed raised rates paints a different story. In fact, since a Fed rate hike fends off inflation, the last cycle of hikes actually caused mortgage rates to retreat lower. Although history doesn’t always repeat itself, it certainly can be a reliable indicator of future behavior. Further, the rate of Fed hikes will likely be far slower than in prior periods of increasing rates. This may prove to be exactly what the market needs to help soften interest rates.
Although there is no immediate need to lock in at the moment, improvements in the cost of achieving a certain interest rate will not likely be dramatic today. Therefore, we will maintain our locking bias.