Mortgage Rates Lower - 10yr at 2.16%

Mortgage rates moved lower today following weaker-than-expected employment data from the Labor Department.  The May job report on the headlines did not look good but standing back at the number of new jobs this year, a bump in the road is all we see. Jobs are gaining, and wages are increasing. The monthly data has always been questionable - has been that way since the beginning of time. Look no further than the BLS, it cannot accurately count jobs as rapidly as the data is required.  The revisions lower for April and March are good examples. Nevertheless, traders and market pundits always react in extremes and that is why I am hesitant on overreacting to the news. 

There is very little economic data next week.  Monday has it all, April factory orders, May ISM services sector index, Q1 revisions of productivity and unit labor costs. No Treasury borrowing. It is the week before the FOMC meeting on the 13th and 14th. The withdrawal from the Paris deal and todays’ weaker jobs data will not deter the Fed from increasing the FF rate as some were talking this morning. The Fed is committed and nothing has occurred that will dissuade it. It is almost totally baked in the prices and levels at the short end of the curve. There is one issue however, that the FOMC will likely discuss in detail at the meeting, the recent decline in US and global inflation. Commodity prices falling led by crude oil pulling inflation lower, and wages increasing but not a rate that will increase prices. Consumers are reluctant to spend -  housing prices increasing, rents increasing but not in significant amounts to offset the slow global growth.

The 10yr note yield did get to 2.15% but closed at 2.16%, while MBSs enjoyed a robust day.  What was strange is that the stock indexes did the same as there is usually opposite n direction of each other.  The dollar continued to decline, gold increased $10.00, and crude oil -$1.96. 

When job growth trends are "potentially reversing" for the worse, interest rates win.  It is too soon to know if this is merely the beginning of a bigger move toward lower rates, but we will know a lot more about that next week.

In summary, had a nice move in rates after the monthly jobs report missed expectations. If we can stay here or mover lower on the 10yr treasury we should see even more price improvements. But with that said the current 2.16% on the 10yr has been a tough nut to crack in 2017. Time will tell. If you are closing soon, we are at the best levels in quite a while so locking is not a terrible idea. If you are not closing for 30+ days, let’s see what happens next week.