Mortgage Rates Edge Upward Before Jobs Report

Mortgage rates moved higher today, but only to the top levels we have seen in the last 30 days as this tight range (pendulum) we have been in has been going back and forth.  The rates have not really changed during this time, but the charges associated with those rates have moved. With extended periods of narrow ranges comes increased odds for a bigger move.  There's never any way to tell if such a move will be higher or lower--only that it's more likely.

The House passed the new health care bill this afternoon. How much it will cost is still to be determined - not unlike ObamaCare in that regard. The bond and mortgage markets were volatile this morning with the 10yr increasing to 2.36% and at one point MBS prices down over 30BPS.  By the time I got my morning report out, the rates settled down as the 10yr closed at the open price of 2.35% and the MBSs lost 14BPS.

March factory orders were less than thought this morning, although February orders were revised better. Non-durable goods orders showed a nice increase for durables, slightly higher than the advance durables last week.  There were some other particulars in the report, of which the data was not what those that think economic growth will hit 4.0% this year.

The main focus today, tomorrow’s April employment data. The forecasts are a plus but even those forecasts are nothing to become too excited about. Unemployment is being predicted to go up to 4.6%.  The unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work.

Beside employment tomorrow, we will have a slew of Fed officials out, including Janet Yellen around noon – but she will be talking about "125 Years of Women's Participation in the Economy" -  not directly related to current events. Nevertheless, when she steps up markets do focus. 

Will crude fall into the $30s? Not likely because producers will stop increasing output until once again the price increases to make it profitable once again. In the meantime, crude is leading other commodities lower and reduces the inflation concerns - and indirectly provide one support for the long end of the yield curve. Crude oil today down $2.35 to $45.47 down from $49.23 two days ago.

In summary, mortgage pricing continues to meander within a range that we have been in for some time.  Most likely it will take something very significant to take us out of this range, but until we can rule out the risk of this latest uptrend (as small as it has been) continuing, the lock/float environment continues to favor safety vs risk-taking.  That said, more risk-tolerant borrowers can still use the higher rates from last March as a "lock trigger."  In other words, if rates move back to those levels, that's a sign to lock and avoid further losses.