As of last week, rates were showing some signs of resilience, but they had to wait for the true test from this week’s jobs report. Spoiler alert: they passed the test. It wasn’t that the headline job count was particularly low, but it wasn’t strong enough to argue against the fact that the labor market has cooled off compared to the first half of the year, or that 2024 is much cooler than 2023. The simplest way to visualize the cooling is via this chart of the unemployment rate.  It would be fair to point out that 4.2+ is still a historically low unemployment rate, but just as fair to point out that the unemployment rate tends to move with a sort of glacial momentum that rarely changes course abruptly. This cooling is one of the reasons the Fed decided to begin cutting rates in September. As we discussed in the weeks leading up to that, the market is able to anticipate those decisions, thus pushing rates lower before the Fed actually pulls the trigger.  The same thing is arguably happening this week, especially after today’s jobs report. 10yr Treasury yields serve as a benchmark for mortgage rates, indirectly.  They can help us understand how rate sentiment reacts to data.  Here’s how they reacted today: In addition to the jobs report, Wednesday’s ISM Services index was also rate-friendly (i.e. it came out weaker than expected). Mortgage rates don’t always track perfectly with Treasury yields, but they’ve also been moving lower–especially after the jobs report.  The average lender is at the best levels in a little over a month and a half.

Solid Conclusion to a Solid Week. Has The Tide Turned?

After Thanksgiving week introduced a potential breakout from the recent uptrend in yields, this week kept hope alive.  It also kept us in suspense until today due to the jobs report.  Despite a decent facade (227k vs 200k f’cast), the closer one examined today’s jobs data, the weaker it began to look.  Markets agreed without much hesitation.  It wasn’t as if the data was downbeat enough for a massive rally, but we’d argue that today’s modest rally is still a great victory on a week where yields were already pushing the lowest levels since October 21st. Next week will be important in determining the endurance of this rally with Treasury auctions and inflation data.  The following week will set the tone for the end of the year with the Fed’s dot plot and rate announcement. 

Econ Data / Events

Nonfarm Payrolls

227k vs 200k f’cast, 36k prev

Unemployment Rates 

4.2 vs 4.2 f’cast, 4.1 prev

Participation Rate 

62.5 vs 62.7 f’cast, 62.6 prev

Consumer Sentiment

74 vs 73 f’cast

1yr inflation expectations

2.9 vs 2.6 prev

Market Movement Recap

08:54 AM Fairly flat overnight and modestly stronger after jobs report.  MBS up just over an eighth and 10yr down 1.8bps at 4.153

10:03 AM MBS now up a quarter point and 10yr down 3bps at 4.14

11:10 AM off the highs.  MBS now up only an eighth on the day and 10yr up .4bps at 4.175

04:40 PM Heading out near the day’s best levels.  MBS up a quarter point and 10yr down 2.3bps at 4.148

We all know that today’s jobs report is the most important economic data on an given month. We also know that a higher payroll count tends to be bad for bonds/rates.  So why are bonds rallying despite payrolls coming in at 227k versus a 200k forecast?  First off, in the realm of nonfarm payrolls (NFP), this is a small enough beat to be considered “as expected.” 
Perhaps more importantly, traders assumed that last month’s incredibly small 12k NFP would be revised much higher.  Instead, it was only revised up to 36k. Finally, the combination of the labor force participation rate and unemployment rate suggests the actual level of unemployment was 0.2% higher than last time. 
Even without the additional context from the labor force participation rate, the unemployment rate trend seems clear. 
The counterpoint is that 4.2+ is still historically low, but this isn’t a data series that tends to reverse course so quickly once a new trend gets underway.
 

These mitigating factors are more than enough for traders to look past the modest beat in the headline NFP number.

The counterpoint to this morning’s rally is that it’s just not that big as far as NFP-driven rallies go–not even as big as Wednesday’s ISM/Powell combo.

The reaction has been more compelling with respect to Fed rate cut expectations, helping quite a bit to increase the odds of a December cut.  Notice the lack of a reaction in Fed Funds Futures to Wednesday’s data in the chart below.  This is just an interesting observation about what matters to the Fed rate outlook and what doesn’t.

The Consumer Financial Protection Bureau is giving the funds to more than 4.3 million consumers harmed by a defunct credit-repair conglomerate, the largest-ever distribution from the bureau’s victim-relief fund.

The Toronto-based bank suspended its medium-term growth targets and announced a full-scale review of its strategies following historic anti-money-laundering failures.

These regulatory announcements in the banking industry are currently open to public comment.

The influence of expected policy changes from President-elect Trump will have on real estate next year could be mitigated by economic factors, Realtor.com said.

The 30-year fixed rate mortgage is at its lowest point since the end of October, but it is still relatively elevated at near 7%, Freddie Mac reported.

Don’t steal packages off of porches… you never know what will be inside them… A very low-tech attempt at dissuading thieves. On the flip side, what do Signal, iMessage, and WhatsApp, used by some originators in communicating with borrowers, have in common? Apparently, per the FBI, they’re “encrypted” and have much more security than simple texts… Worth thinking about using rather than plain texts. Speaking of tech, of great interest to lenders and vendors in general, these days, most popular TV models utilize automatic content recognition (ACR), a form of ad surveillance technology that gathers information about everything you watch and transmits it to a centralized database. Manufacturers then use your data to identify your viewing preferences, enabling them to deliver highly targeted ads. Here’s how to stop it. (Today’s podcast can be found here and Richey May is sponsoring this week’s. Richey May’s consulting, cybersecurity, business intelligence, and automation services are designed by mortgage experts to help you continue to drive growth and increase profitability. Hear an interview with Rate’s Ben Cohen on some tips and tricks on what has helped to consistently make him a top-five originator in America by both file count and dollar volume.) Lender and Broker Software, Services, and Products What were the greatest challenges for loan originators this year? What tactics did they use to find success? Which trends affected them the most? Get the answers to these questions and more in the latest Loan Originators Survey Report from MGIC and Loan Officer Hub. 1,000 originators shared their insights on marketing, social media, referral relationships, technology and more. Download the 2024 report to get valuable insights you can use in your own planning for 2025!

It’s been a remarkably calm week for mortgage rates, and a fairly decent one relative to several recent examples.  The average top tier 30yr fixed rate hovered just over 7% for most of November before breaking back into the high 6% range at the beginning of last week.  Since then, there haven’t been any “bad days” for the mortgage market, even if we’re still a long way from the low rates of September. If rates can’t be as low as we might like them to be, the next best thing is for them to be stable and they’ve done exceedingly well on that front.  Since last Friday, the average top tier 30yr fixed rate hasn’t moved more than 0.02% on any given day.  Today was the least volatile as there was no change versus yesterday’s latest levels. This little “ledge” in the high 6% range corresponds to a similar ledge in 10yr Treasury yields at 4.17%.  Both are arguably bracing for impact from tomorrow’s big jobs report.  Said “impact” could either help or hurt, depending on the outcome of the data.  In general, the lower the job count, the better it would be for rates, and vice versa.