Waiting on Fed to Take Further Steps

Waiting on Fed to Take Further Steps

Mortgage bonds are trading near flat in early market trading. The good news is that bond prices remain above critical floors of support that could eventually lead to more good things to come for mortgage interest rates.

 

Stock prices are swinging from up to down as news stirs regarding President Trump and China’s President Xi delaying their meeting until April or later. It seems there is more work to be accomplished before a trade agreement can become a reality between the two powerhouse countries. With so much riding on the outcome of the trade agreement, stock investors will likely continue to see small bits of good news between now and the time an agreement is made. Since trade challenges have been heavily responsible for significant ups and downs in the stock market, we can continue to anticipate more of the same going forward.

 

The pressure is mounting for the Federal Reserve to take steps to continue to soften its economic position in order to help avoid a global slowdown. With interest rates finally on hold, the next step would be for the Fed to continue purchasing mortgage bonds and 10 Year Treasury notes. This would help place downward pressure on mortgage interest rates, which is something that very few professionals thought would happen. In fact, I continue to see real estate agents preach about rising interest rates and increasing home values.  One or both must slow. The increase pace in both markets is not sustainable.

 

With bond prices near the top of a trading channel, we will maintain a locking bias.