Mortgage Rates Flat - ADP Reports More Jobs

Mortgage rates continue to trade in a very tight range with relatively low volatility. There appears to be little upward pressure on current mortgage rates. And tomorrow's weekly unemployment report will almost certainly be ignored as investors wait for Friday's much more important release. Of course, if something totally unexpected happens politically or geopolitically we could see volatility in rates.

Where Are Mortgage Rates Going?                     

>>> Holding steady, but trade tension is a concern

ADP Employment for March came in better than anticipated.  Many believe that it predicts what Friday's Employment Situation Report will show.  The payroll processing company added 241,000 new payrolls, much higher than the 200,000 expected by analysts, which is not good for rates because more employment puts upward pressure on them.

Overnight China announced trade tariffs on the US to match the tariffs the US has announced on China exports. Officials described China’s response as defensive and forced upon Beijing in hopes of compelling the U.S. into talks to ease the countries’ trade frictions.  Trump’s tweet: “We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”  Under the U.S. plan, companies have until May 22 to object to the proposed tariffs, and the U.S. government then has at least 180 days to decide whether to go ahead.

The result of the announcement has driven the US stock indexes down. Interest rate markets are finding support on the news but our driver for mortgage rates, the 10-year Treasury note, has been bouncing around all morning.

Markets more fearful over trade than jobs presently, as there was no negative reaction to the ADP report in the bond markets. The third straight outsized result for ADP and is far above consensus for a 185,000 gain in the comparable government measure. The employment report has proven strong to robust over the last five reports, and if the March data on Friday makes for a sixth straight strong result then ADP may start getting new believers in its accuracy.

We have gotten a lot of talk and speculation over the past several weeks and months about inflation data and what it all means for the Federal Reserve and their plan to raise the federal funds rate. At their meeting a few weeks ago, they came out and said that a total of three rate hikes would take place in 2018. As we know with the Fed, their outlook is hardly set in stone.

Depending on what the data says, and the monthly Jobs Report is a key driver in all this as the average hourly earnings reading could show signs of an uptick in inflation. If this happens, we could always see an adjustment to their policy. So if you do not want to deal with the threat of rising rates on Friday, you’re going to want to lock in a rate right now. Mortgage rates seem as though they will remain flat on the week until Friday, so there is definitely a window of opportunity for borrowers to take advantage of.

Rate/Float Recommendation           

>>> Do not get caught in this quiet period, best to lock.

Mortgage rates seem as though they will remain flat, so there is a window of opportunity for borrowers to take advantage of. Tomorrow's weekly unemployment report will almost certainly be ignored as investors wait for Friday's much more important release. There is a clear risk though this week with the monthly jobs report on Friday. If you want to avoid the potential for rising rates, we recommend that you lock now. You can always give me a call, or visit my website at Call The Money Man.