Mortgage Rates Higher Again Today

Mortgage rates were higher yet again today, taking their cue from the Employment Situation report.  This is the big "jobs report"--the most important piece of economic data month in and month out.  It is widely expected to always be the key consideration on the day it's released and today was no different.  Today's weakness quite simply confirmed 4.25% as the more prevalent quote, but 4.375% is with less fees. 

The labor picture brightened today and it was much brighter than even the "whisper" numbers.  The Non-Farm Payrolls for June shot up to 288K.  The original market estimates were for 213K with whisper numbers around 230K after yesterday's stronger than expected ADP report.  While this was definitely a good reading, perhaps more importantly both May and April were revised upward showing that this is part of a larger trend. April was revised to over 300K to its highest level in a year just one month after our dismal 1st QTR ended.  

The Unemployment Rate dropped from 6.3% to 6.1% which is the lowest since September of 2008.  Part of that reduction is due to more people back to work but also, the participation rate fell again with another 111K fewer people out of work but is no longer looking for work. 

ISM Services had a very robust reading of 56.0 vs est of 56.3. But it was very close to market expectations and as you can see by the line chart above, MBS had little reaction to it. 

Overseas we saw the European Central Bank (ECB announced that it kept all rates unchanged, with the main refinancing operation rate flat at 0.15%, while the deposit facility continues its existence in NIRP purgatory at a negative 0.1%.  

The bottom line is  MBS would have sold off even more today if it wasn't a long holiday weekend.  Traders "parked" their cash into safe and boring bonds which caused a spike in demand for long bonds. This money will be put back to work on Monday...so its temporary but it did help to offset some of the downward momentum of our early sell off. 

In summary, a strong Jobs Report sent mortgage pricing down again today ahead of the holiday weekend, however, much of the weakness appeared to be priced in already and the damage was much less than it could have been. Some rate friendly news out of the European Central Bank also seemed to mitigate some of the damage. With a quiet week coming up with Economic Data releases we may get relative calmness but consumers should stay on the defensive.  Floating for now appears safe for borrowers closing beyond 30 days.