“Day after day, day after day, we stuck, nor breath nor motion; as idle as a painted ship upon a painted ocean.” -Samuel Taylor Coleridge Taylor, The Rime of the Ancient Mariner.
Once again, last week was kind of a boring one for mortgage rates.
Save for the excitement of October 15th, it’s been kind of a slow
sideways grind for rates for about a month now. Last week’s Primary
Mortgage Market Survey from Freddie Mac saw the average rate on a
30-year fixed-rate mortgage rise six basis points to 3.98%, putting
rates a touch above 14 month lows. From a broader perspective, rates
have been trending lower for the past year (see above chart), but it’s
not an extreme trend by any means. Much closer to a sideways grind. UPDATE:
we’re seeing a sell-off in bonds this morning following some good
manufacturing data. If it is sustained, mortgage rates will tick up.Today’s Economic Data:
U.S. Manufacturing picked up in October. The Institute for Supply Management’s (ISM) Manufacturing Index came in above expectations, showing a reading of 59, compared to expectations of a reading of 56 (readings over 50 indicate expansion). In particular, new orders were up significantly. This is putting some upward pressure on rates this morning.
The Week Ahead:
As per usual, the first week of the month we are focused on the monthly employment report, which comes out Friday morning at 8:30. The expectation is for +240k jobs in September, and the consensus range is +200k to +280k. From a surface level, the employment picture is improving, when you dig a little deeper, the situation becomes less clear. U-6 unemployment, which is a broader measure of employment that includes frustrated and marginally attached workers remains elevated. Wages remain stagnant, which would seem to indicate that there is slack in the labor market (at least in the eyes of Janet Yellen and many members of the Fed). With inflation also running below Fed targets, I don’t think that the employment report poses much risk to rates unless we see a really good print.
That said, there is some risk here, there always is as nonfarm payroll Friday approaches. Usually rates will become volatile, even if the volatility levels out and we end up back where we started (which seems to be the rule these days). If you are in the process of getting a mortgage but haven’t locked your rate, you probably want to keep a close eye on things this week. Problem is that if we do see a strong print, and you go to lock on Friday, the damage will likely already be done.
And of course,
there are the mid-term elections on Tuesday. While I personally do not
participate in rigged games, the outcome and the makeup of Congress
following the elections will have some impact on rates. Jon Hilsenrath
actually has a pretty interesting take in this morning’s WSJ regarding
the elections and possible ramifications regarding
the Fed. From the looks like we’ll see the GOP pick up seats in the
House and Senate, and that two more years of gridlock will ensue. So it
goes. Poo-tee-weet.
Scheduled Economic Data that May Impact Rates This Week:
As a broad rule of thumb, positive economic data, particularly data that exceeds expectations, correlates with a rise in interest rates. Poor economic data or data that misses expectations correlates with a dip in rates. As with most other things in life, this is not a hard and fast rule.
Monday: ISM Manufacturing Index: Expected: 56, actual: 59.
Tuesday: International Trade:
Wednesday: ADP Employment Report:
Thursday: Weekly Jobless Claims:
Friday: Nonfarm Payrolls:
source: totalmortgage.com
