Employment Data Takes Mortgage Rates Higher
Posted 02-07-2011 at 08:52 AM by VictorBurek
Friday’s employment data gave us mixed results. The number of jobs created rose far less than expected, but the unemployment rate fell when a rise was expected. The less than expected number of jobs creates is being attributed to bad weather across much of the country. One clear trend though is the labor market is recovering and market participants took the report as good news for the economy. Once the employment data was released, the benchmark 10 year treasury note rose from 3.52% to 3.67% which forced mortgage backed security prices lower and mortgage rates higher.
There is very little data this week than can impact mortgage rates with no economic reports being released today or tomorrow.
Our first somewhat relevant event will be tomorrow when we get the results of the first of three treasury auctions. Tuesday, the Department of Treasury will auction $32 billion of 3 year notes, followed Wednesday with $24 billion of 10 year notes and concluding Thursday with $16 billion of 30 year bonds. The 10 year note auction is the most important as the life of a mortgage is much closer to 10 years than 3 or 30 years. Hopefully, the recent rise in treasury yields will draw strong demand which can help mortgage rates improve later this week but weak demand would likely result in more bond selling and higher consumer borrowing costs.
Since the employment report did not give us a clear jobs outlook, Thursday’s lone report, weekly Jobless Claims, might have more impact than normal. Economists are expecting a slight decline in claims from 415,000 to 412,000. Since our economy is driven by consumer spending, the higher the number of new claims the better chance mortgage rates improve.
Our week ahead concludes with two relevant reports, International Trade and Consumer Sentiment. International Trade, also known as Goods and Services Trade Balance will be posted first and it is expected to show our trade gap widening to $-40.5 billion. This report typically does not have a large impact on mortgage rates. Later in the morning, the University of Michigan will release their index of Consumer Sentiment. It is expected to come in at 75.5 from January’s final reading of 74.2. This would indicate consumers are more optimistic about their own financial conditions and thus more likely to spend money which would benefit stocks and pressure bond prices even lower.
Lender rates sheets are similar to what we had on Friday. The par 30 year conventional rate mortgage is holding in the 4.875% to 5.125% range. The par 15 year conventional mortgage remains in the 4.25% to 4.50% range. To secure a par interest rate you must be willing to pay all the closing costs associated with your mortgage including an estimated one point loan origination/discount/broker fee.
I feel the recent rise in yields will attract strong buying this week at auctions. If you can tolerate a little volatility, i favor floating for now.
There is very little data this week than can impact mortgage rates with no economic reports being released today or tomorrow.
Our first somewhat relevant event will be tomorrow when we get the results of the first of three treasury auctions. Tuesday, the Department of Treasury will auction $32 billion of 3 year notes, followed Wednesday with $24 billion of 10 year notes and concluding Thursday with $16 billion of 30 year bonds. The 10 year note auction is the most important as the life of a mortgage is much closer to 10 years than 3 or 30 years. Hopefully, the recent rise in treasury yields will draw strong demand which can help mortgage rates improve later this week but weak demand would likely result in more bond selling and higher consumer borrowing costs.
Since the employment report did not give us a clear jobs outlook, Thursday’s lone report, weekly Jobless Claims, might have more impact than normal. Economists are expecting a slight decline in claims from 415,000 to 412,000. Since our economy is driven by consumer spending, the higher the number of new claims the better chance mortgage rates improve.
Our week ahead concludes with two relevant reports, International Trade and Consumer Sentiment. International Trade, also known as Goods and Services Trade Balance will be posted first and it is expected to show our trade gap widening to $-40.5 billion. This report typically does not have a large impact on mortgage rates. Later in the morning, the University of Michigan will release their index of Consumer Sentiment. It is expected to come in at 75.5 from January’s final reading of 74.2. This would indicate consumers are more optimistic about their own financial conditions and thus more likely to spend money which would benefit stocks and pressure bond prices even lower.
Lender rates sheets are similar to what we had on Friday. The par 30 year conventional rate mortgage is holding in the 4.875% to 5.125% range. The par 15 year conventional mortgage remains in the 4.25% to 4.50% range. To secure a par interest rate you must be willing to pay all the closing costs associated with your mortgage including an estimated one point loan origination/discount/broker fee.
I feel the recent rise in yields will attract strong buying this week at auctions. If you can tolerate a little volatility, i favor floating for now.
Total Comments 1
Comments
-
a few lenders have repriced better today.Posted 02-07-2011 at 01:00 PM by VictorBurek
