Rates
Last Friday’s jobs report was tough on rates. Mortgage bonds ended the day -61bps and we’re down another 12bps this morning.
Important notes for understanding and using this information:
- Any site/chart that advertises rates (like the above) is showing a national average for one very specific loan scenario, as reported by survey respondents. These aren’t the rates that borrowers are locking in. Use this only as a tool to get a gauge of what ballpark to expect
- 30 Yr Fixed Conventional: a “top tier” scenario is used as a baseline (owner occupied, single family, 25% down, 780+ credit)
- Most important point: the best use of this index is to track the CHANGE from week to week. There are so many things that can cause discrepancies between borrowers, lenders, and quotes.
Commentary
Hotter than expected jobs data Friday sent yields higher with the 10-year yield reaching recent highs not seen since November of 2023. Globally yields are moving higher with many traders anticipating a slowing of rate cuts this year with the Fed remaining cautious amid signs of economic strength mixed with potential policy changes as Trump takes office.
Officially known as The Employment Situation, the jobs report is the most comprehensive monthly update on the state of the labor market in the U.S. It’s also the economic report that has the greatest potential to cause volatility for interest rates. In general, higher levels of employment coincide with higher interest rates, but the traders that determine rates are less focused on the unemployment rate and more focused on the jobs report’s headline component: nonfarm payrolls (NFP). NFP is quite simply a count of the number of jobs added to or removed from the economy on any given month.
Market participants are anxiously awaiting PPI and CPI releases Tomorrow and Wednesday respectively. Recent PPI data suggests that inflation is moving higher again. Mortgage rates will likely print higher this morning and remain under upward pressure as yields continue to trend higher in the short run.
Lock/Float Considerations
Locking bias: don’t risk it.
Strong jobs report reinvigorates the upward trend in rates. The upcoming CPI data can take the pain to the next level or help create some support. In general, this is a lock-biased environment until such time as the data takes a cohesive and decisive turn in a rate-friendly direction. That’s not to say there won’t be pockets of short-term opportunities, but capitalizing on them would involve luck rather than strategy.
Econ Calendar – Potential Market Movers
Core: excludes food and energy
Tuesday, Jan 14
- Core PPI & PPI (Producer Price Index), m/m
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- Change in the price of finished goods and services sold by producers. It’s a leading indicator of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer
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Wednesday, Jan 15
- Core CPI & CPI (Consumer Price Index), m/m
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- Change in the price of goods and services purchased by consumers. Consumer prices account for a majority of overall inflation.
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- CPI, y/y
Thursday, Jan 16
- Retail Sales, m/m
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- The primary gauge of consumer spending, which accounts for the majority of overall economic activity
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- Unemployment Claims, weekly
Loan Program Updates
- Medical debt will no longer be reported on consumer credit reports: https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-to-remove-medical-bills-from-credit-reports/
- In 2023, credit bureaus removed paid medical collections and all outstanding collections under $500.