Mortgage Backed Securities prices after yesterday's late afternoon rally, are slightly down in volatile and choppy trading. Today’s outlook is bleak, as the data has been reported and it is not looking good for the jobs outlook. Nonfarm payrolls were expected to show a loss of 325,000 jobs, the actual number came in at a loss of 533,000.
To add insult to injury, September and October were revised downward to show additional losses of 199,000. The unemployment rate was expected to come in at 6.8% but came in slightly better at 6.7%. In result of these reports, mortgage back securities have bounced all over this morning.
As a general rule poor employment numbers is positive for MBS, and often times if the news is bad enough, the impact is not good for anyone. We are currently about .25 in discount (Rate yield down by .25 bases points) below closing levels from yesterday, no need to panic and lock rates. Investors did not pass on the gains that where realized we saw yesterday, I anticipate similar rates today as we saw yesterday.
National Average Mortgage Rates
| | Rate | Points | Change |
| 30 Year FRM | 5.53% | 0.7 | -0.44% |
| 15 Year FRM | 5.33% | 0.7 | -0.41% |
| 1 Year | 5.02% | 0.5 | -0.16% |
| 5/1 Year | 5.77% | 0.6 | -0.09% |
| Source: Freddie Mac | |||
| Fed Prime | 4.00% | | |
| 30 YR Treasury | 3.08% | | |
This may be a good time to write about the news everyone has heard and is talking about, the Treasury lowering rates to 4.5%.
First of all, the Treasury will not set an exact rate; they are hoping to encourage rates to that level. And what do you think they have already been doing? The announcement last week about the government buying mortgage backed securities is an example of an action the government can take to bring rates down.
My suggestion is do not let this rumor postpone a refinance or a new home purchase. Right now, fixed rate mortgages are at all time lows sitting at 5%.
Is there a chance that rates will move lower? Absolutely and a good chance at that, and keep in mind there is also a chance of rates moving higher. There is much more room above us then below us, as rates can only drop a little lower. As I have said in past updates, a bird in hand is worth more then two in the bush.
Ian Bennett
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