Mortgage Rates Steady – Now Where Does It Go After the Jobs Report?

Mortgage rates held surprisingly steady despite a strong employment numbers for the month of June.  When the report came out, the numbers were higher than anticipated, even though the revisions were a bit of a surprise as they were thought to change drastically as well, but did not do such.  Some of the internal numbers gave it a mix bag approach, and after the initial knee jerk reaction, the market subsided and did not move much thereafter.

The stock market burned hot today after the June employment report - it does not take much to drive indexes higher these days as investors hunger for profits. The treasury markets did not budge on the better employment numbers, and as for the UK markets, they have come to the conclusion that the exit vote and its implications are well off into the future and not an issue now that the shock of it is wearing off. Two years of back and forth discussions once the Brits actually trigger Article 50 in the EU charter be a long time.

The monthly employment report never ceases to surprise me, as this is one report that makes me cringe as it is such a game changer.  I have been able to read the market better over the years, but I still am conservative when this time approaches. 

May consumer credit increased more than forecasts.  Most of the increase in non-revolving credit, which reflects a mix of vehicle financing and student loans (which are tracked in this report). Revolving credit, where credit card debt is tracked, rose only a small amount. Consumer reluctance to run up their credit cards is definitely a plus for long-term consumer health but is not a plus for short-term consumer spending.

Next week we have Treasury Auctions.   The key data next week will be on Thursday and Friday with PPI, CPI retail sales, industrial production, factory use, and consumer sentiment index. In the meantime Fed speakers are out every day next week. With the employment report in hand expect more bullish (hawkish) comments.

In summary, what happened today is something of a game-changer in terms of how cautious we need to be when considering a big bounce back in rates.  This does not guarantee immunity from a move higher, but it removes the most immediate threat.  At this point, there are a few ways to proceed if you are considering locking.  The first approach would be to simply lock because rates are right on top of all-time lows.  There's nothing wrong with that.  The other approach would be to set a limit for how much worse things would have to get before you lock to avoid further losses, and then to readjust the level of that safety net if rates continue lower.  While it is too early to say the down trend is continuing, idling in place is fine, for now.  No hurry to lock as I am going to see where this goes!