U.S. Treasuries and Mortgage rates continued their descent lower this week (as price goes down, yields go up) with the 10-year Treasury closing at 2.500% on Wednesday. However, interest rates took a welcomed reprieve on Thursday prior to a mild decline Friday morning.

Friday morning saw the May Producer Price index (PPI) rise .5% versus .4% expected. However, the inflation measure that excludes volatile food and energy prices dropped. This helped keep rates in check.

The Fed meets next week for its 2-day meeting that will begin Tuesday and end on Wednesday. The expectation is that the Fed members will begin to prepare the investing world for rate increases down the road, presumably in late 2015.

With a ton of technical damage in the mortgage bond market, we remain biased toward locking even though the dramatic volatility the past several weeks appears to suggest bonds are oversold.

U.S. bonds rose this week with a volatile spike Friday in response to a solid Jobs Report. The headline number in Friday’s Jobs Report was 280,000 jobs created last month, which beat expectations. This was better than expected.The jobs number increased the prospects of a Fed “lift off” from near zero interest rates. Both bonds and stocks continue to trade with a keen eye on when the Fed will increase rates. While the jury is still out on whether October will be the month, the odds increased Friday morning in favor of an increase.

Technically, long term mortgage bonds broke through key technical multi-year resistance bands. This has priced up mortgages across the board.

With the current 10 year U.S. Treasury at 2.38%, we are biased toward locking in loans at the time of application.

U.S. Bond yields drifted fractionally lower this week based on continued concerns about the overall lack of growth in the global economy. Supporting this claim was the revised gross domestic product(GDP) reading Friday morning. The revised GDP came in at -.7% lower than the -.2% originally reported. This revision was widely expected so the bond market was not caught off guard by this revision. Both Canada and Europe also reported anemic GDP numbers this month.

Greece was front page news this week as it is struggling to make its June debt payments. Should a resolution come to pass, bonds may see a sell-off. However, should Greece default, things may become chaotic, which will benefit U.S. bond yields.

U.S. housing data continues to remain positive with favorable numbers this week out of the Case-Shiller Home Price Index. Solid housing data has driven home prices to new highs for 2015.

With so many unknowns in the world, we continue to float interest rates with a bias toward locking.

Friday morning saw the U.S. Bond market sell off in response to a mildly stronger than expected Core Consumer Price Index (CPI) report which strips out volatile food and energy costs. Core prices rose on higher prices for housing expenses and medical costs (remember inflations is bad for bonds), while house furnishing saw the biggest increase since 2008.

Stocks continued their rise this week to record levels. Earlier in the week the Federal Reserve released its minutes which all but took a June rate hike off the table.

With the 10 year U.S. Treasury trading at 2.21%, we continue to cautiously float interest rates with a bias toward locking.

Friday morning saw U.S. Bonds rally on both a lower than expected May Consumer Sentiment Report (88.6 vs. 96.0), and May Empire Manufacturing Index (3.1 vs. 4.5 expected). The rally in bonds this morning is a welcomed relief and comes after another tough week for bonds which saw the 10-year Treasury reach 2.29% mid-week escalating sentiment that the super low rate environment could be in jeopardy.

Globally, the European Central Bank reassured markets that the ECB’s asset purchase program will continue until inflation reaches 2%. These “dovish” comments aided in Friday’s morning bond rally in the U.S.(remember the world is so interconnected today).

On the housing front, online real estate firm Redfin reported Thursday that home sales across the market rose at a rate of 5.40% from April 2014 to April 2015. This is a positive sign for real estate brokers and mortgage originators.

Due to continued volatility, we recommend cautiously floating interest rates with a biased toward locking.

Bond markets globally continue to trade with volatility as evidenced by the German Bunds 10 year debt rising the past 6 trading days at a faster pace than any time in its modern history (with German bond rates so low a small rise in yield means a lot).

Back in the U.S., all eyes were on the U.S. jobs report this week. And the job report offered a little something for everyone. The unemployment rate fell to 5.4% from 5.50% and the Labor force Participation Rate came in at 62.80% which is still near lows seen back in the 1970’s. Wage growth continues to remain stagnant.

The overall feeling from the Jobs Report is that the Fed will not “lift off” on interest rates in June so U.S. bonds responded favorably to the report. The report also shot stocks up with the major U.S. Stock indexes all trading up over 1% higher Friday morning.

With the U.S. 10 year trading favorably after Friday’s job report, we are biased toward floating with the market.

Both U.S. bond and stock markets remain volatile with the ten year treasury hovering around 2.11% above the psychological 2% mark.

On Wednesday morning, The Gross Domestic Product (GDP) numbers came in well below expectations (.2% versus the 2.2% recorded in 2014). GDP is an important economic indicator as it measures the value of the production of goods and services in the U.S., adjusted for price changes.

While the GDP numbers were soft, Friday morning Consumer Sentiment came in red hot recording the 2nd highest reading in more than eight years. U.S. Bond yields traded higher on this strong number.

From a global perspective, U.S. bonds are also affected by what happens in other parts of the world. With the rise in Euro and German yields from ultra-low levels , U.S. bonds continue sell off increasing yields on bonds and mortgages. Therefore, we are biased toward locking in interest rates.

U.S. bonds ended the week with a mild rally based on a weak Durable Orders report. U.S. Stock markets continue to remain at, or above, all-time highs on strong earnings from tech behemoths Google, Amazon and Microsoft. On the housing front, Thursday’s housing report saw U.S. single family sales in March record their biggest drop in more than 1½ years, snapping three months of gains.

The 10 year U.S. Treasury continues to trade under 2% percent. Mortgage rates for both ARM and fixed rate mortgage remain very attractive.

Thursday was a big day for economic news with reporting on Jobless claims (a bit higher than expected), Housing Starts (less than expected) and the Philly Fed (better than expected). In the end, all of this news did little to move bonds in the US. This morning the Consumer Price Index (CPI) for March rose by .2% inline with estimates, while the Core CPI rose a smidgen above expectations. US interest rates continue to hover near all-time lows with the 10 year treasury hovering around 1.90%.

At the moment, we are cautiously floating rates with a bias towards locking in.