Mortgage Rates Slightly Down From Yesterday's Spike

Financial markets are still grappling with the resignation of the White House’s top economic adviser, Gary Cohn. Will this impending trade war make more jobs or will it loose?  We just got a strong reading in the ADP employment report for last month that is being digested, but right now, though, mortgage rates have backed down slightly from yesterday’s spike.

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>>> Rates are moving lower, but is this something to hold on to?

The rumors were true, as President Trump’s top economic adviser, Gary Cohn, resigned yesterday after losing the battle on aluminum and steel tariffs. The departure for Cohn has left many financial market participants concerned that the likelihood of a trade war has now jumped. Cohn, who was a former Goldman Sachs executive, was well liked by investors and gave them a certain amount of confidence with the positions he would take on taxes and regulations.  With him gone, the markets are now left to deal with the possibility of more protectionist policies from President Trump.

The ADP employment report for February is showing a very strong headline reading of 235,000. That’s 30,000 above the consensus reading that analysts came up with. Investors always keep their eye on the ADP employment report as it’s kind of the appetizer to the main course meal of the Labor Department’s Employment Situation report on Friday morning. You can never really have to much confidence that the ADP and Labor Department’s readings will match up, though, as they often come in with fairly disparate readings. Still, today’s report has bolstered investor interest in Friday’s report.

The yield on the 10-year Treasury note (which is the best market indicator of where mortgage rates are going) is down almost four basis points today. Mortgage rates typically move in the same direction as the 10-year yield, so rates are on the decline today. For the majority of 2018, we’ve seen the 10-year yield steadily rise, but it’s been holding between a tight range of 2.85%-2.90% for the past couple of weeks.

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Mortgage rates are on the rise, even though we are seeing them sideways today.  The wildcards are tariff talks and anything unexpected on the geopolitical front. If we get a strong headline reading in the monthly jobs report on Friday, that would almost certainly cause rates to jump. Even if we don’t, the long-term projection remains for mortgage rates to move significantly higher.