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November 8th, 2013

What do the job numbers say about mortgage rates, the Fed?

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Job MarketThe U.S. added 204,000 jobs last month, well exceeding economists’ predictions of about 120,000. Even better, September and August were revised upward by a combined 60,000 jobs.

So, what does this better-than-expected job number mean for mortgage rates? Also, what does today’s employment report mean for the Fed and their plans to taper QE?

This week’s forecast

Let’s start by seeing how Keith Gumbinger, vice president of HSH.com, concluded last week’s Market Trends newsletter:

Still, the preponderance of evidence is that things remain largely weak, and that ongoing Fed support is welcomed and needed. That said, there are many weeks to go before December’s decision needs to be made, and warmer data makes it easier for the Fed to move with conviction.

That’s off in the future, though. For now, we face a packed week of economic data to consider … including the October employment report. Warmer data, and mortgage rates will firm; cooler and rates will fall. We’ll opt for warmer, overall, and perhaps a slight firming in rates.

Mortgage rates

Mortgage rates were already firming this week as the latest economic news came in a little better than expected. Now that we have the October job numbers, you can expect mortgage rates to firm even more.

According to MarketWatch.com, the yield on the 10-year Treasury–a reasonable indicator to the direction of mortgage rates–was up by 14 basis points (0.14) Friday morning.

Fed timetable

As I wrote on Monday, with each passing FOMC meeting where no tapering decision is made, all eyes become focused on the next meeting with growing anticipation of a taper announcement. MarketWatch even went as far as publishing this headline on Friday: “‘Dectaper’ back on table: payrolls reactions.”

As Gumbinger wrote, there’s still several weeks in front of the next FOMC meeting in December. There’s plenty of time for the economy to firm to the point where the Fed feels comfortable announcing at least some degree of a taper.

But even if the Fed decides to taper slightly next month, the markets already felt the impact when Chairman Bernanke first discussed tapering back in June. The adverse reaction his comments provided served, in retrospect, to better prepare the markets for when the true tapering begins …. Whenever that it.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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