This morning, bond markets opened up to a sharply different market than what we were left with last Friday, with rates creeping higher again. While U.S. markets paused yesterday for an extended President’s Day weekend, the rest of the world kept right on trading, and this morning there is strong evidence that the market sentiment remains firmly against us. Things look dismal for mortgage rates, as investors expect that rate increases from The Fed will not stop anytime soon and may continue until July or beyond. Expert advice is clear–lock in the loan no matter when you close because from here it looks like rates will only continue rising over time.

This week, the markets will have plenty of data to watch, yet nothing to really look forward to. Confirmation that Fed members are open to more aggressive rate hikes could be found in the minutes from the meeting on Wednesday, potentially leading to further market woes. Adding to the stress for investors, we have Treasury auctions this week that could meet with weak demand and have a negative effect. There is not even any bright points on Friday thanks to the PCE inflation report. We do have some housing data like existing and new home sales, but unfortunately it won’t affect rates. All in all, there’s no silver lining here – it’s going to be a hard week for investors.

To Sum this all up – As economic data continues to paint a picture of strength about the U.S. labor market, it is becoming increasingly clear that attitudes surrounding interest rate hikes is unlikely to change anytime soon. Rising rates may seem worrisome in the short-term, but continued increases are indicative of a thriving economy so far as employment and inflation suggest. As such, all signs point to rate hikes holding steady where they are—or even further increasing—as the economic recovery continues its upward movement.

The UMBS 5.5 coupon (MBS or mortgage backed securities) at 99.50, down -70bps on the day already around 10am ET.

The 10yr Treasury yield at 3.94 and it won’t be long before we see the 10yr settling into the 4’s.