Mortgage Rates Lower Than Last Week

Mortgage rates fell to their lowest levels in more than a week today, following the release of August's official employment figures.  Stock indexes were bombed today on the August jobs report, and undue fears the Fed will move this month. Still no consensus belief on what the data will do for the FOMC decision on the 17th. For everyone believing the Fed will move there are two that do not think so. The employment report headlines looked good but once the entrails are divined, not so good when considering the wages being paid for the jobs that are increasing. The idea of full employment based on historical views does not get it in this new normal. The new norm for the Fed and most economists must be to ignore job quality, ‘we cannot do anything about the reality that 90% of consumers are seeing their disposable income lower now than prior to the 2008 financial crisis so we are going to focus on 5.1% unemployment’…Fed thinking?

Is it enough to move the Fed?  Probably not, but in a sense I would like to see it just to move the chatter off the constant debate. The 10yr note yield declined today on the soft jobs report. Although there were increased revisions in June and July, August job growth was the lowest in five months.

Today the bellwether 10yr treasury closed at its lowest yield since 8/25 at 2.12% and breaking out of its seven day tight range. Mortgage markets not moving though.

Next week, Treasury will auction $68B of notes and bonds (a combined total of $34B of 10s and 30s); a good test for demand at these present low yields. It is a short week with Labor Day on Monday, after three days of celebration China’s markets will be open on Monday increasing the potential of even more volatility; look for China’s markets to get hit again on Monday. Not much US data next week, what there is happens next Friday with PPI and consumer sentiment.

In summary, bond markets cannot make up their mind as to which way to go. This is one of the most muted reactions to a jobs report I have ever seen especially one which missed expectations.   The trading channel I have mentioned in the past remains intact and while it does, I might recommend to those who are ready to close in the next 15 days, take these rates and not look back.  The longer term may be to wait a little to see what next week brings us.

Happy Labor Day Folks and Be Safe!