Mortgage Rates Rise After Jobs Data
Stronger than expected Employment data and the end of the Fed's MBS purchase program were negative for mortgage markets. Mortgage rates ended the week at the highest levels since January. Investors viewed Friday's Employment report as positive for the economy, which means it was bad news for mortgage markets, and mortgage rates climbed after its release. Against a consensus forecast of 200K, the economy added 162K jobs in March, the highest level since March 2007. The Unemployment Rate remained at 9.7%. While the headline number fell a little short, other aspects of the data displayed a larger degree of unexpected strength. Hiring of census workers, a temporary boost, added just 48K jobs, which was far less than expected. Revisions to data from prior months added 62K jobs. The separate employment survey used to calculate the unemployment rate, which includes smaller companies, showed a higher level of job gains in March. To support the economy, the Fed has purchased almost $1.25 trillion of MBS since the start of 2009, but the MBS purchase program ended on March 31. Forecasts for the impact on mortgage rates of reduced demand for MBS varied from slight to as much as a one percent rise. While mortgage rates rose this week, yields in other bond markets posted comparable increases, meaning that the effect of the end of the MBS purchase program was close to the lower end of the estimated range this week.

Also Notable

• The 4-week average of Jobless Claims dropped to the lowest level since September 2008
• The Treasury will auction $74 billion in 3-yr, 10-yr, and 30-yr securities next week
• Oil prices rose to $85 per barrel, the highest level of the year 
• The Fed purchased $6.0 billion in agency MBS during the final week of the program

Average 30 yr fixed rate:
Last week: +0.15%
This week: +0.10%
Stocks (weekly):
Dow: 10,925 +25
NASDAQ: 2,400 0 

Week Ahead

It will be a light week for economic data next week. Pending Home Sales, a leading indicator for the housing market, will come out on Monday. ISM Services will also be released on Monday. The FOMC Minutes from the March 16 Fed meeting will be released on Tuesday. These detailed meeting notes often provide additional insight into the Fed's decisions. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

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