Mortgage Rates Moved Up Again

Mortgage rates moved moderately higher today after the Employment Situation report came out much stronger than expected.  Treasury rates have continued to increase this week with the retracement after the huge rate declines in January and early this month. MBS rates inched a little higher but most of the selling occurred in treasuries as safe haven trades were being unwound. This week had something for economic bears and bulls.

Today the employment report added more for bears and bulls. The pace of job growth far exceeded even the most optimistic estimates. The negatives were that hourly average earnings as I mentioned yesterday would be looked at hard.

Bulls liked the data this week, bears did not mind the bullish data too much. In two weeks the FOMC meeting on March 15 and 16 shows the consensus that the Fed will not tighten again at the meeting even though a myopic look would suggest the Fed could move. There is still too much uncertainty about the economic outlook, other central banks are cutting rates and a move higher now by the Fed would throw the currency markets into huge volatile movements. The markets are not expecting the Fed will act in March, one of the key reasons stocks have rallied. Not likely in April either, there is no scheduled press conference after the April meeting. That is not to cast in stone but a move by the Fed will require a lot of Q&A from Yellen. And a June meeting is way too far away for any credible guesses.

There is not too much on the calendar after what we had this week. The techs are bearish now as the retracement continues. The 10yr 50% retracement would be 1.95%, the next possible technical support, as it settled at 1.88% today. Volatility should be high next week with very little scheduled data, allowing traders and investors room to guess and opine without any Fed speakers or domestic data to twist around.

In summary, what was a pretty strong jobs report this morning is instilling some pain with mortgage rates today. The only solace in the report was a weaker wage component otherwise I think we would be much worse.  So, my opinion, is that your strong bias should be towards locking in your rate sooner rather than later as I have a feeling we may be in for more pain next week once the market fully digests some of the strong components of this jobs report.  I have now changed my stance to lock anything that is closing within the next 30 days.

And as an added note to my summary, we must respect the current situation - as I continue to expect lower rates will occur as the economic growth slows, dragged lower by increasing declines in global economies this year. Opinions like mine however, are just that - opinions. My real business is to give out sound advice to my clients and team of loan officers with short term outlooks and forecasts - but I do have some thoughts for the longer outlook. The rest of this year has plenty to think about.