Mortgage Rates Waiting for Jobs Report

Mortgage rates tried  to make a move today, but still are in line with the weakest levels we have seen in five months.  However, one must also be aware that these rates today are still at the lowest they have ever been except for the few months earlier this year as well as for a few months in 2012.  Hence, do not feel that you have missed the boat, as these rates are still among all-time lows.

The 10yr Treasury is holding at 1.81%, trading in a tight range.  MBSs have been up and down, but like the 10yr, showing very little drive towards any move up or down. Volatility could increase tomorrow, following the Employment Situation.  This "jobs report" is the biggest piece of economic data that comes out on any given month in terms of its market-moving track record.  Its typical potency is likely limited by the election and broader global concerns that will be addressed in early December.  Even so, if the jobs report comes in significantly higher or lower than forecast, it can still cause a big stir in financial markets.

Yesterday’s FOMC statement was not much different than the previous statement after the September FOMC meeting. Markets and the Fed expecting to increase the FF rate at the December meeting. Should happen as long as there are no negative economic surprises in the data until then. Central banks are finally at the bottom of the barrel with negative rates and massive QEs.  The Fed has to lead central banks out of the wilderness - but it is also in the wilderness.

Then there is the election.  A Clinton win will increase taxes and massive fiscal spending. President Obama wanted shovel ready jobs when he was elected - there were none ready so it went away. Clinton has echoed her desire to increase jobs with infrastructure jobs similar in nature to the depression level of job creation under Roosevelt (think the Hoover Dam for one). Trump has not made any thrust in that direction, wants to cut corporate taxes and re-negotiate all of the US trade agreements to increase growth. Markets very nervous about Trump, yesterday 370 economists signed on to defeat him. Not sure which may be the better way to go but do believe economists are the least likely to have a clue.  As a group they have missed every economic forecast for the last five years - and most earn their living from think tanks and Wall Street interests. It is called the dismal science for nothing

In summary, markets are tense and anxious at the moment.  It is not an environment conducive to risk-taking.  While it is possible that rates could improve if tomorrow's jobs report is significantly weaker than forecast, it continues to be the case that banks will be slower and more tentative in passing along market improvements on mortgage rates.  Bottom line, floating one's rate has a smaller than normal reward for the same amount of risk.