Mortgage Rates Slightly Higher Following Jobs Report

While it was far from a dramatic move mortgage rates ticked slightly higher after today's Employment Situation data. Better jobs data for July stopped the 10yr yield decline right on its near-term major technical support it hit yesterday at 2.22%. Not news to these posts, as I have been stating for the last few sessions as yields fell.  Increase in inflation but the job increases pushed the unemployment rate down to 4.3% as expected. Wage gains were flat yr/yr. from June +2.5%. Rate watchers debate heavily about increasing wages as jobs continue to increase, but so far nothing of substance.

The problem today was that market participants were generally positioned for the report to come out slightly weaker than forecast.  Instead, it came out slightly stronger (209k new payrolls were added in July versus estimates of 183k).  That provided quick and easy justification for bond market weakness (which implies higher rates). 

Thankfully, the recent range has been narrow enough and lenders have been slow enough to react to market movements that rate sheets weren't too badly damaged.  In fact, you might not notice too much of a difference between today's rate quotes and yesterday's, but on average, we're back in line with Wednesday's offerings.  At the time, those were the best in a month.

The technicals remain slightly positive as long as the 10yr holds below 2.32% (currently 2.26%). Greenspan and his bubble comment on the bond market - maybe he has to define bubble.  A bubble definition is that a market is about to blow up – but I do not see that now but unless there is a pullback in stocks the outlook for lower rates is difficult to expect. That said, once the correction hits interest rates will benefit. From what levels is the $64.00 question. In the context of this week the 10yr note generally unchanged and MBS prices increased 20BPS.