WeeklyBasis: Most Rates Up .5% In 2013, But Jumbo Rates Steady

BLS_Feb2013_3

BLS_Feb2013_2

Rates are up today after a BLS report showed the U.S. economy added 236k nonfarm payrolls in February, well ahead of expectations of 160k, and January was revised down from 157k to 119k.

The February number is also well above the average monthly gain of 175,000 in the prior 6 months. Since reaching a low in February 2010, nonfarm employment has grown by 5.7 million. Growth in construction, professional and business services, retail, and leisure/hospitality jobs led the gains (see chart above).

This non-farm payrolls figure is from the ‘Establishment Survey’ component of the jobs report which doesn’t count actual people, but rather counts how many companies opened or closed, then uses that data to estimate the number of jobs gained or lost.

Unemployment dropped from 7.9% to 7.7% according to a different component of the jobs report called the ‘Household Survey’ which counts people. There are 12 million people unemployed. Plus another 8 million people are working part time because their hours were cut or they can’t find a full time job. Not pretty, but still the nonfarm jobs gains are seen as positive by markets and bonds are selling.

RATE REACTION
MBS_March_8Rates rise when mortgage bond (MBS) prices drop on a selloff, and this table* shows that selling today in key Fannie Mae MBS coupons that lenders use as benchmarks for consumer rate pricing.

The Fannie 30yr 3% coupon is down sharply on the day and the week. Today alone it’s down 15 ticks (a tick is 1/32) to 102-10. And if you compare today to Friday’s close, it’s down 44 ticks.

This reaffirms a very real rate spike for 2013: rates are up about .125% today, on top of another .125% rise since Tuesday. So rates are up .25% this week and up .5% for 2013.

2013 RATE RECAP
Rates started rising January 3 when markets interpreted December Fed rate policy meeting minutes as indicating that the Fed would end quantitative easing (aka QE, which is Treasury and mortgage bond buying to keep rates low) by the end of this year.

There was a brief reprieve as MBS recovered and rates touched all-time record lows (of 3.25% for a 30yr fixed loan up to $417k) for two days on January 15-16.

But then MBS selling resumed and rates were .375% above all-time record lows within a couple days, and they held that higher level until three factors reversed the trend last week: Fed chairman Bernanke reaffirming commitment to QE, Italy’s election reminding markets of the eurozone’s debt troubles, and worries about U.S. budget cuts.

Rates dropped .125% from last Friday to this Tuesday but then, as noted above, they’ve risen .25%. And again, the net result is rates up .5% for 2013.

JUMBOS RATES ARE STEADY
One important note: jumbo loans above $417-625k (depending on your region) are not spiking. Comments above pertain to Fannie/Freddie mortgages and corresponding MBS. Jumbo loans are backed by private investors rather than Fannie/Freddie, and jumbo secondary markets are hot, which is helping keep jumbo rates steady while Fannie/Freddie rates are rising.

Here’s a deeper dive on the February jobs report, and more good links below.
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Reference:
Awesome jobs report CHART FEST – by FloatingPath

Wake Up Call: Free Refi Boom Almost Over

Why The Jumbo Mortgage Market Is So Hot

$MBB, $TLT, $ZN_F, $TNX, $MACRO

*Table used with permission from MortgageNewsDaily

 
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