Mortgage Rates: More Jobs = Higher Mortgage Pricing
February 6, 2012 
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A blowout Non-Farm Payrolls (NFP) report this morning has mortgage rates heading higher. After a week filled with data that was roughly in-line with expectations the NFP report blew away forecasts. The expectations were for 150,000 new jobs to be created in January, yet when the counting was done 243,000 new jobs were documented. This is certainly confirmation that the US economy has strengthened dramatically, yet the naysayers have already begun to spin why the jobs uptick may be limited.
Two additional economic reports have the potential to accelerate the upward move in mortgage pricing today or to moderate it. At 10 AM the ISM Services Index and Factory Orders report will be released. The ISM Services Index is forecasted to increase from last month, which seems like a good bet given the number of service-sector jobs that were created according to the NFP report. The Factory Orders report is forecasted to drop slightly which also seems likely given the weakness in the ISM Manufacturing Index earlier in the week. If these reports come in as expected, I suspect that it will cause further losses in MBS and more upward momentum for mortgage pricing.
On Monday Euro-Zone financial ministers are meeting and there is hope that approval of the second round of bailout funding will be approved at that time. However, there is much still to be agreed to. After reaching a deal with private creditors to cut their payouts from existing Greek debt by 70%, the burden is now on the Greek government to come up with additional savings from labor market and other reforms that will drop the country’s debt/GDP ratio to 120%. This is a tall task as Greek politicians who must approve these reforms don’t want to be associated with these very unpopular reforms. I would not be surprised to see Monday come and go with no deal and no bailout funds for Greece.
After a week in which the attention was primarily on the state of the US economy, next week will see a return to the Euro-centric focus that has been so pervasive for over a year.
Have a great weekend!
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