Although mortgage note rates are unchanged the associated closing costs are slightly worse this morning.
On Tuesday I recommended a ‘locking’ position as I believe the risk of rates worsening outweigh the probability of them improving in the near-term. This morning better-than-expected employment data and developments in Europe are pressuring rates higher.
Results from the private payroll provider ADP monthly jobs report showed that the US economy added approximately 200,000 jobs last month well above expectations. In a separate report the Labor Department reported that fewer people filed for unemployment claims last week than was expected. Could these be a signal that tomorrows all-important jobs report will also be stronger than analysts are expecting?
If tomorrows jobs report does beat expectations (currently around +125,000 jobs) then the Fed will be less likely to announce another round of quantitative easing (QE3) when they meet next week. Given that QE3 is already partially priced into rates this would likely cause rates to rise.
In Europe the European Central Bank (ECB) announced an aggressive plan to help support periphery countries deal with the debt crisis. Under the new plan the ECB will be able to buy an unlimited amount of government bonds with maturities of up to 3 years. Next week the German courts will rule on whether it is constitutional for the ECB to buy up bonds with longer durations.
All-in-all the interest rate news is unfriendly this morning. I will maintain a locking position.
Current Outlook: locking