Mortgage Rate Update February 21, 2017

The bond market was closed yesterday in recognition of Presidents Day.  Speaking of the nation’s top office, I read over the weekend that during the President’s daily briefing he was told that three Brazilian soldiers were killed overnight.  In reaction the president was stunned and showed an uncommon display of grief and emotion.  After collecting himself the president asked, “how many is a brazillion?”  (may or may not be true).

The ‘Trump Bump’ continues to roll on which is not favorable for mortgage rates (CLICK HERE to learn why).  Since early November the S&P 500 has gained nearly 13%.  During that time mortgage rates have increased by ~.50%.

Why have stocks been rallying?  First, investors anticipate legislation which will cut taxes and boost federal spending.  Second, higher anticipated inflation levels make holding bonds less attractive therefore some investors have cut fixed income holdings in favor of stocks.  Neither of these outcomes are certain.

Has the stock market become overheated?  According to data from FactSet the 12-month forward price-to-earnings ratio for the S&P 500 is at its highest level since 2004.  Furthermore, there is growing concern that France’s upcoming presidential election could rattle the global financial markets.  We’ll be keeping an eye on polls there.

The technical picture in the interest rate markets are a little muddled to start the week.  I am going to maintain a floating bias but have grown cautious.

Current Outlook: cautiously floating