Mortgage Rates Moved Higher in Front of Jobs Report

Mortgage rates moved higher today as we saw more positive economic news today.   The most prevalently quoted conforming 30yr Fixed rate for the best-qualified borrower is now more so towards the 4.5% level than yesterday.

Nothing more significant than tomorrow’s employment report - always the most important data of the month but this time even more so. The bellwether 10yr note continues to coil within a tight range and currently at 2.74%.  Any recent decline in the rate has been short-lived and due mainly to some kind of market shock that was not expected - Monday’s rally over the Ukraine issue and the Jan employment report a month ago.  In each instance the improvement in rates ran out of steam in a day or two.  Most trading in the last month on the 10yr and mortgages has been in a narrow range.

Softer than expected economic reports supported the bond market briefly on rallies, but there has been no follow-through on improvements, mainly on the unknown weather effect. The recent slowing in the economy is widely thought a result of the weather in most of the US in Dec, Jan and Feb; even Janet Yellen and most all Fed officials believe it, so too do investors propelling the stock market into new highs recently (S&P). The consensus ‘guess’ for the jobs report tomorrow is 154K non-farm jobs and 165K private jobs with the unemployment rate unchanged at 6.6%.  Do not overlook revisions either – as revisions higher will add to the selling if we see them.  The markets were completely convinced a month ago that Dec jobs would be revised higher than the 75K reported but there was essentially no revision.  The risk continues to be that the negative employment data that would normally help interest rates tomorrow, could instead be mostly shrugged off due to the weather whereas stronger economic data stands a better chance to have it's normal effect (which is to push rates higher).

In summary, locking is a must leading into tomorrow. If the jobs report is above estimates rates will take off. A miss and old man weather gets the blame so we move sideways to slightly up. Until Spring when weather can't get the blame, any bad data is tossed out.