Jobs report better than expected, mortgage rates likely to worsen

This morning’s all-important jobs report showed the US economy added 165,000 new jobs in April.  This figure was more than analysts had expected.  The financial markets are reacting as expected.  US stocks are trading higher and bonds are trading lower which will likely pressure interest rates higher.

may 3 jobs report MBS chart

Mortgage Rate Update September 6, 2012

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.

IS THE ECB FINALLY GETTING BOLD? IF SO RATES MAY BE ON THE 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

Mortgage Rate Update March 31, 2011

Mortgage rates are a little better this morning.

Jobs and inflation are the primary focus for the interest rate markets for the next 36 hours.  The all-important jobs report is due out tomorrow morning and the markets are expecting 200,000 new jobs for March & the unemployment rate to hold steady at 8.9%.  Click HERE to understand how this report can impact mortgage rates.

This morning’s weekly jobless claims figures were mixed.  Data for the most recent week was positive with claims falling by more than analysts had expected.  However, previous weeks figures were revised higher.  Good news for the jobs market tends to be bad for mortgage rates and vice versa.

Inflation on the rise in the EU

Although inflation measures remain tame here in the US the same cannot be said for other economies.  This morning the European Central Bank (ECB) reported that price pressure in the EU rose to the highest level in 29 months.  This is concerning because it may be an indicator that inflationary pressure will rise here at home AND because if the ECB begins to raise interest rates it would also cause rates to rise here.

Given that rates are better than yesterday morning I would recommend a locking bias.  It’s always a coin-toss headed into the jobs report.

Current outlook: locking bias