Mortgage Rates Fell Abruptly Today - Employment News Not as Expected

Mortgage Rates fell abruptly today, following a significantly weaker than expected Employment Situation report. The data hit markets before most lenders had rates available for the day, but most of them still held back on the first round of rate sheets. As trading levels in the secondary mortgage market only improved into the afternoon, lenders released new rate sheets reflecting more of the day's movement. Ultimately, it's been enough to bring 4.5% back into view as a possible rate, though 4.625% remains at least as prevalent. 

 

Today's movement ends up being fairly uncomplicated. Heading into late December, rates leveled-off into an extremely flat pattern. This carried into the new year and it became increasingly clear that it would be up to today's big jobs report to cast a vote for the next move to be higher or lower.

 

All major economic reports have a published consensus level, readily available from the likes of Reuters and Bloomberg. These are median values based on surveys of economists and other forecasters which essentially amount to the market's expectations. The farther away from those expectations a given piece of data falls, the more of an impact it can have on markets. The more important the report, the more magnified the effect.

 

With that in mind, today's Employment Situation report is THE most important piece of recurring economic data and the margin by which it missed expectations is among the largest ever. Weaker employment data tends to push rates lower and today was obviously no exception.

 

While that's great news in the short term, the conclusion is less obvious in the longer term. The Fed has already begun tapering and it will probably take more than one jobs report (no matter how far off the mark it is) to even get markets considering a potential change in course. As of right now, this report amounts to a very welcome push back against the broader uptrend in rates though the uptrend remains intact. The question simply concerns how long the push back will last. The longer it does and/or the bigger it gets, the riskier it is to float.

 

In summary, all eyes were on highly anticipated Jobs Report that was released this morning, and report was considered a major miss with only 74k new jobs created in December with initial estimates closer to 200k. 10 year Treasury has continued to hover around 3.00%, and the impact of this report has moved the 10 year below levels seen last before the FOMC tapering announcement. Today's report has shifted the momentum towards lower interest rates, and Retail Sales next week can further confirm this.