Mortgage Rates Waiting for Tomorrow's News

Mortgage rates began the day slightly higher, on average, but managed to make it back in line with yesterday's levels by the afternoon.  This afternoon MBS prices and treasury pieces slowly edged higher ahead of the February employment data tomorrow morning. As I noted this morning, markets are not completely focused on jobs, but the hourly earnings and labor participation rate are playing larger roles now than in the last year or more. No debate jobs are increasing, although wages are dragging. Monthly employment reports always the key data each month, this one may be even more so. The Fed is ready to continue normalization increasing the FF rate - wage gains, increasing labor participation and steady job growth are critical to whether markets believe the Fed will move or not or when it is likely.

Where is the economy now? Conflicting data continued today. Unemployment declining but manufacturing and now services sector weakening. Tomorrow’s employment data likely will add more mixed signals, not sure where it will come from but employment generally provides a lot to discuss. The FOMC meeting is March 15th but I do not expect a rate increase at that meeting. The policy statement may set up an increase at the June 27th meeting (the April meeting on the 27th) is not likely as Yellen is not scheduled for a press conference.

Two views - the bullish economic outlook far outweighs the bearish view presently. Human nature always tends toward the optimistic views Wish I could get there but I remain skeptical about the future economic growth - I sincerely hope I am wrong. In any case the work is predominately near term analysis and it does not influence whatever view I have looking way down the line.

In summary, tomorrow brings the most important economic report of any given month – the jobs report.  As always, the jobs report carries significant market moving potential, for better or worse.  At the moment, I am in a precarious position when it comes to potential volatility.  With rates already at a crossroads on the upper edge of their all-time low range, a big move higher would risk confirming a move into the higher range seen in late 2015.  In other words, if we go higher here, it could be harder to get back. It is extremely risky to not lock in going into tomorrow's employment data, risk vs. reward merits locking. Albeit I believe rates are heading for fresh new lows, it may take some time before we get there. Loans with a timeline of 15 days should be locking in, longer time frames as always can speculate, but I think we are too close to our support level reversing and becoming a level of resistance to speculate at this point.