Mortgage Rates Barely Moved After Jobs Report

Mortgage rates were mostly unchanged today, which was uncommon after the big jobs report release on the first Fridays of the month.  More often than not, the most important part of the report is the new jobs that are created for the month.  That figure was off by a large margin, which would have sent the rates lower – but the other parts of the report were of a surprise as the Unemployment number dropped below 5 to 4.9%, and the hourly wages were up 2.5%, which was not to be expected that high. When you take the whole report in total combined, the caveats were enough to offset the slower pace of job creation. 

Too much being made of it however, the new chatter is back to debating whether the Fed will make another increased in the FF rate at its March meeting. Until this morning markets were almost totally of the belief that the Fed could not increase rates in March and there was an increasing view that maybe no increases this year. The take away for most is that whatever markets think one day is about as solid as Jell-O in the oven. The Fed is not likely to increase rates in March - a move now will only make the dollar stronger - other central banks around the world are cutting rates and trying to stimulate their economies.

Overall, it was a very volatile week as we saw MBSs increase just a tad, but the 10yr Treasury has dropped down to 1.85%.  The tech models and all of the ordinary tech measurements remain bullish. However, with hardly any changes in mortgage prices floating did not helped much this week, nor has it hurt. The stock market is going to continue to decline in a choppy pattern as we have seen this year. Earnings and forward guidance overall not good, US stocks still over-valued in most economist’s judgements. Janet Yellen’s testimony next Wednesday and Thursday should keep markets in narrow ranges early next week. This week the dollar’s strength got more attention as it relates to crude oil, and in turn the stock market that trades on crude prices recently. The dollar weakening increases the price of oil, increasing oil increases commodity prices and inflation outlooks increase. A vicious circle - where it starts or ends is what analysts and economists are struggling with currently.

In summary, bonds barely blinked at today's tepid NFP report.  While the net jobs gained disappointed, increased hours and wages hinted at eventual inflation.  We are still hanging very near recent lows on treasury yields, and the longer we do, the better.  It's hard to say if rates are now holding or slowly tending lower, that answer will depend on next week's data.  The only loans I am floating are well over 30 days from closing.  I do not see much incentive to float those ready to close, better to book the gains and sleep soundly.