Mortgage rates are mostly unchanged from last Thursday.
Interest rates continue to drift sideways despite the stock market climbing. Equity investors are more or less brushing aside recent weakness in economic reports due to the influence of severe winter weather. Normally, when stocks rally interest rates rise. However, apparently fixed income investors aren’t as convicted that weather is causing the weakness. We may learn more Friday when the latest report on 4th quarter GDP is released.
The economic calendar is busy this week. Things kick off tomorrow with the S&P Case-Shiller Home Price index and Consumer Confidence. We also have Fed officials speaking every day this week including Janet Yellen testifying to Congress on Thursday. To top is all off the US Treasury is scheduled to auction $96 billion in fresh debt supply beginning Tuesday.
With stocks rallying and mortgage-backed bonds (MBS’s) trading in a tight range I am growing concerned about volatility. Whenever MBS prices trade within a tight range over a prolonged period of time it increases the likelihood of a “break-out” where prices move sharply one direction or the other. Given our long-term outlook of rates rising I can’t help but be cautious. I will shift to a locking position.
Current Outlook: locking