Waiting on Retaliation?

Yesterday’s airstrike initiated by President Trump that killed a top Iranian commander has the financial markets heading for safety in early morning trading. It appears that stocks will take a bit hit this morning, which will likely help mortgage interest rates as investors seek the security of the bond market. In cases such as this, markets often times react sharply at first only to recover within a short time. However, with Iran promising retaliation, we could see a longer term impact to stocks, which should maintain interest rates at the low levels at which they are currently.

Mortgage bonds are heading towards the top of a trading channel that has held mortgage interest rates from improving above current levels for months. Given the overwhelming strength of this ceiling, I don’t anticipate a breakout at this time. Although the threat of a military retaliation from Iran is a serious concern. I don’t this it will push bond prices higher until something actually happens. This means that if you have been waiting to lock in a rate, they could be as good as they will get in the near term.

We will maintain a locking bias.