To Lock or Not to Lock – that is the question facing many homeowners who want to refinance or buy a home.  Mortgage rates are dependent upon the financial markets. Generally good economic news is bad for interest rates.  Everyone looks to the Federal Reserve for guidance on financial decisions.  So what does the Fed believe is happening to our economy right now?

Fed Chair Jerome Powell was on 60 Minutes Sunday night saying we could see Great Depression-like unemployment numbers while 2nd Quarter GDP could sink 20% to 30%. However, Mr. Powell did have a bright outlook ahead saying, "… in the long run, I would say the U.S. economy will recover. We'll get back to the place we were in February; we'll get to an even better place than that. I'm highly confident of that. And it won't take that long to get there."  That "won't take long" comment overrides a "prolonged" recovery comment he made in a speech last week.  This renewed hope is the reason for optimism in the market this week.

Another game changer is vaccine development.  Shares of drug-maker Moderna are surging after a vaccine showed promise in early-stage studies.  Obviously, the hope and optimism over a vaccine are moving the markets as well.

The trend to watch is how well local economies will fare in the States that re-open.  Currently there is optimism that we will not see an increase in COVID-19 cases at the same time.  Let's hope this trend continues as it would be great for the country.

Meanwhile, Mortgage Backed Securities (MBS) start off this week by losing ground. And the 10-year yield has inched higher to .67% - well above support at .60% ... that support has been a "bear".  The Treasury will be debuting its 20-year Treasury Bond on Wednesday this week with a huge amount of supply coming soon to fund the massive stimulus programs enacted by Congress. We shall see how the bond market sops up all that paper.

The bottom line for mortgages remains to lock your rates for loans that are closing relatively soon.  This short-term good economic news is not bond friendly.  Surging stock prices weigh heavy on the bond market as the week starts off.  Long-term, we will continue to get hit with bad economic news.  You might consider floating interest rates on new loans with a longer time frame to close.  But to avoid risk, continue to lock loans as you get closer to funding or funding within the next 30 days.