Mortgage Rates Edged Higher Following Jobs Report

Mortgage rates were sideways most of the day, but started to show signs of weakness and pushed higher by the end of the day.  All this despite a weak reading of the Employment Situation, which is traditionally the most influential piece of economic data on any given month as far as bond markets (which drive mortgage rates) are concerned.  Recent intractability of inflation combined with several years of solid jobs gains have increasingly robbed this report of that historical influence. 

Ultimately, today only saw a token amount of weakness in bonds/rates.  With congress, back in session next week and the European Central Bank set to discuss its bond buying plans in 2018, we should know more about whether the recent rate rally is bouncing or just leveling-off.

Although the jobs were not at the levels expected, job growth is still strong. Q2 GDP growth at 3.0% is solid and Q3 likely to see growth about 2.6%. Trump turned up the focus on tax cuts when he delivered the starting gun in his speech in Missouri on Wednesday - and Congress gets back to work next Tuesday. Republicans failed to come together on health care, concern is Republicans will also have trouble unifying on a tax cut plan. Whatever the debate over the next month’s Democrats are unlikely to agree on much. The debt ceiling will be the key for the return of Congress and tax cuts until the debt limit is increased won’t be seriously dealt with. Then we still do not believe there will be any bill or tax reforms this year unless it is done without Democrats and total unification of Republicans. Republicans generally agree on lower tax rates, they are not sure yet how low they can go, what breaks would go away and whether their plan would reduce government revenue or be “revenue neutral.”

In summary, bond markets yawned at today's tepid NFP jobs report, losing minimal ground when gains would have been more logical.  Today marks the end of "summer" trading.  Next week may show where rates are headed with a policy statement from the ECB and bond traders' return from a summer in the Hamptons.  Borrowers within 30 days of closing have a choice of grabbing the best pricing since November or rolling the dice.  Even though I like to gamble, right now, I am letting everyone know that if you are closing in the next 30-days, lock them up.

Have a safe Labor Day Weekend!