We could see higher rates

Mortgage bonds are again selling off this morning, as the stock market continues to climb higher.  Initial Jobless Claims helped fuel stocks after it was reported that only 278,000 new unemployment claims were filed last week.  This was below the 290,000 claims anticipated.  However, it does still represent an increase of 11,000 claims from the week prior.  Now that seasonal and holiday claims are likely behind us, we will see a more accurate reflection of the US job market which now appears to be very strong.

Anticipated layoffs in the energy sector spiked up to 20,000 in the month of January.  This is clearly a result of oil prices that are too low to sustain current expenses and costs of maintaining the current level of expenses incurred by oil and oil related companies.  To put this in perspective, in all of 2014 there were only 14,000 oil related layoffs.  Therefore, January’s figure represents a higher number than we had the entire year in 2014.  Since these have not yet happened they are not reflected in today’s unemployment claim figures.  However, we anticipate energy related job losses to eventually take a toll on overall job growth in the US as well as unemployment claims.

Tomorrow’s Bureau of Labor Statistics (BLS) report on job growth for the month of January is a difficult report to predict.  On one hand, low oil prices are providing a significant headwind in the energy related sector which has been a primary source of job creation during our economic recovery.  However, most other industries are doing well and continue to add new jobs to our economy.  Given the overall technical picture, we will take the safe play and maintain our locking bias.  Mortgage bonds have formed a clear downward channel.  If this continues we will likely see higher mortgage rates in the next couple of days.