Mortgage Rates Up Heading Into Jobs Report

Mortgage rates did not move too much today compared to yesterday's latest levels, but that's the only way to view them as being 'unchanged.'  Currently, we are seeing rates at their highest levels in more than 3 months, and SIGNIFICANTLY higher than they were a week ago today. 

We saw more selling in the bond and mortgage markets today ahead of the September employment report tomorrow. Not unexpected, but I did not think the 10yr would go up as much as it has in the last two days to 1.74%.   I have said this all along that the 10yr is now at a very serious technical level of which we saw before the rates fell going back to the beginning of July when most of trading on the 10yr was between 1.60% and 1.50%.

From a pure technical perspective, the 10yr has to hold here, if it breaches 1.75%, we will expect 1.90% to be the next target. 30yr mortgage rates will increase ¼ point if treasuries break down. The Fed is about to tighten, the ECB hinting it may begin tapering of its QE next March, Japan also may re-think its negative rates as it has not worked and even has had negative reactions from consumers. If we are to believe rates will decline it will have to come on the back of a major decline in US and global equity markets; and that is not out of the range of probability. 

All eyes are watching the development of Matthew about to hit Florida, Georgia and South Carolina if the path remains as projected now. This is the strongest hurricane to hit Florida since Andrew. I hope all will be safe as I lived thru Andrew 30 miles North of the bulls-eye. - What I am thinking is the negative impact the storm may have on the economy in Q4, it will have an impact that will likely cause Q4 GDP to end lower than thought and it will distort about every economic report over in October. While the most important issue is the safety of people in the path, get ready for a lot of changes in the economic outlook and difficulty in assessing the underlying real economy in the southeast. Normally I would not make an issue now but what will the Fed do in December if the damage is as bad as is presently talked about? That will be the debate next week and in the weeks to follow.

Crude oil continued to decline today on the belief OPEC will curb output and stick with it. Even the increasing strength of the dollar has not stopped the increase. How long and how high will the increase last? Not sure but most of the oil gurus are looking at $55.00 before more oil is put on the market from US producers. At this level re-starting the wells in the US makes economic sense.

Tomorrow brings the important Employment Situation (aka "the jobs report"), which is the most closely-watched labor market metric on any given month.  The jobs report always carries the risk of significant market movement. Between that and the generally elevated rates, it does not make much sense to float in this environment.  That will continue to be the case until we see either a big push back toward lower rates, or an extended period (5-10 days at least) of stability at current levels.