Mortgage Rates and the Markets Waiting for the Jobs Report Tomorrow

Mortgage rates were steady today as the only thing that moved in a positive direction was the Mortgage Backed Securities (MBS).   The most prevalently quoted conforming 30yr rate for top-tier scenarios stayed at 4.625% while there was a push to bring it back to 4.5%.

The flatness in interest rates reflects the bond market's readiness to digest the most important piece of economic data this month (and every month). Tomorrow morning's Employment Situation Report always has a ton of market-moving potential, and this one is no different. One thing is for sure we can expect a wild ride tomorrow with this release in the morning.  Current “consensus” estimates are for non-farm jobs to have increased 206K and private jobs +215K with the unemployment rate at 6.6% down from 6.7% in Feb.  On Wednesday ADP reported private job growth of 191K, most of the jobs in the service sector.  US stock indexes were slightly lower while the rate markets remained unchanged from yesterday as all types of market participants set positions they are comfortable with going into the data.  Watch for revisions from previous reports tomorrow. If the monthly report is well off the estimates, we can expect a lot of initial movement in the markets at 8:30 in the morning.  The bellwether 10yr is at very significant resistance level at 2.80% as we have noted in the past two days.  A stronger than anticipated employment report is likely going to bush the 10yr above it and in turn set a path for another round of increases in mortgage rates.  A softer report on the other hand will drive the 10yr back to 2.70% and keep the 10yr in its two month range.

My recommendation is to lock ahead of the job report as I feel that even though there could be a reward if you do cautiously float, the risk is too great to justify such.

In summary, with the jobs report tomorrow locking is the safe move given improvements today. Floating into the report is risky and therefore could prove painful if rates move higher. A beat of market expectations will likely cause a rise in rates, while missing the expectation could keep rates stable. This will depend on which way the numbers fall and if any big surprises print. The winter weather factor should also be losing steam as a cause for the lack of job growth in recent months.