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Higher jobless claims equals lower interest rates!
Friday, September 05, 2008
As I'm sure you know by now, the labor market hit the skids this summer. Nonfarm payrolls shrank by 84,000 in August while the national jobless rate mushroomed to a reading of 6.1%. Job loss in both July and June were revised higher by a total of 58,000.
Mortgage investors evidently set-up well for weaker-than-expected news from the labor sector - because the impact of this morning's report on the trend trajectory of mortgage interest rates produced a short-lived little dip to lower levels - before rates began a slow plod back to the unchanged to fractionally higher levels as I write.
It appears market participants may be reaching a saturation point -- where so much "bad" economic news has already been priced into the mortgage market - that actual data confirming expectations gets shrugged off. If this assessment proves accurate, it may be difficult for mortgage interest rates to move noticeably lower from current levels.
The upcoming week doesn't offer much in the way of meaningful economic news until Friday when the August Retail Sales figures and the Producer Price Index statistics will be released. Retailers have already hinted August sales levels will be flat to lower while the sharp drop in energy costs is expected to have contributed to an impressive drop in price pressures for manufacturers.
It is worth mentioning that the delivery month for most mortgage-backed securities will "roll" to October on Tuesday, September 9th. This is a standard monthly administrative function of the mortgage market. The impact of this event is already reflected on most of your investors' rate sheets. (The extended risk associated with the new delivery period expiring in 30-days will lop roughly 25 basis-points (8 ticks) off of current prices on your Market Alert screens before the end of the day on Tuesday. Don't hesitate to call if you have questions regarding this event.
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