19 Nov Not enough benefit to float, locking bias
Mortgage bonds are starting the day to the upside, which is welcomed news to those needing to lock in an interest rate. So far, bonds have been able to maintain above the current level of support which is holding mortgage interest rates from taking another jump higher. The strength of this support level is in spite of a continued strong stock market, which seems to have little fear of the pending Federal Reserve rate hike that seems to be in play at the next Fed Meeting which will happen in December. The tone of the Fed Meeting Minutes released yesterday from the Fed’s October meeting set the stage to prepare the market for the first move higher in short term interest rates since June of 2006. However, there is still a chance they will maintain status quo, depending upon the data released between now and December 16th.
Initial Jobless Claims for the week ending 11/14 were reported at 271,000. This number was in line with the market’s expectations and represents a decline of 5,000 from the prior week’s figure. More importantly, this happens to be the “sample week” used in computing the Bureau of Labor Statistic’s job gain report for the month of November. Therefore, the low number of claims will help support a strong number of job creations this month. However, given that many seasonal holiday jobs will be filled this month, the report must be taken with a grain of salt. Many of the new hires will be released in the first quarter of 2016. We will need to distinguish between part time job growth and longer term career type hires.
Bonds are currently holding their ground. However, the benefit to floating an interest rate could be minimal. Therefore, we will maintain our locking bias.