It’s a lot more of the same this morning as mortgage rates have effectively been unchanged for over two weeks now.
US interest rates look as if they want to move higher following comments from Federal Reserve Vice Chairman Stanley Fischer. Earlier he stated that he sees signs of wage pressure building in the economy. The Fed is not going to raise short-term interest rates until they see inflation move higher to ~2%. If wages due rise in our economy it would likely pressure inflation higher which is a bad sign for mortgage rates.
Meanwhile, interest rates in Germany remain ultra-low. Currently yields on German government 2-year and 5-year notes are negative. This means investors are actually paying money in order to lend the German government money. The 10-year German bund is yielding only .10% (US 10-year note is at ~1.9%). As long as rates remain low in Germany it should keep somewhat of a ceiling on US interest rates.
From a technical perspective mortgage-backed bond prices are trading within a fairly tight range and have been for nearly three weeks. Anytime we see prolonged periods of sideways movement it increases the risk of a “breakout” where bond prices move sharply up or down. These are very difficult to predict.
At this point I believe borrowers have more to lose than to gain so I will take a locking bias.
Current Outlook: locking bias