Mortgage bonds continue to get hammered, as mortgage interest rates take another step higher. The brutal path of the past few days has taken its toll on the mortgage market just at a point when the market is already slowing due to seasonal home buying coming to an end. At this point, it’s too early to say at what point mortgage interest rates will stabilize. Since bonds are in a territory that they have not been in for seven years, it remains difficult to predict what support levels could possibly slow this path. I’d count on things getting worse before things get better.
The Bureau of Labor Statistics (BLS) released their estimate of new job creations for the month of September, and surprisingly, it was a slower month than most economists predicted. With expectations set at 180,000, the report showed only 130,000 new hires. However, wage growth rose last month by 0.3%, and the labor force increased by .1%.
One shock to the BLS report was the Unemployment Rate, which ticked lower from 3.9% down to 3.7%. This is the lowest rate since 1969. Although this is a strong economic indicator of an expanding economy, we need to keep in mind that in 100% of the past times the Unemployment Rate hit its low point of a cycle, it was followed by a spike higher and a recession. Is 3.7 % the lowest we can expect to see? That’s hard to say. However, when it does hit its low point, we can anticipate a spike and recession to follow.
We will maintain our locking bias.