A great week for interest rates and mortgages. Rates are down to lows last seen in July.
The 10 year treasury has broken through a major resistance level of 2.5% and is currently sitting at 2.48% and mortgage rates have dropped to 4.125%.
In the economic news, Existing Home Sales for September came in right as expected, are down about 1.7% from August but very much in line with normal seasonal drops.
Yesterday's Employment Situation Report is very misleading not only in the numbers but the causes. The report was from September, before the government shutdown. The unemployment rate dropped from 7.3 to 7.2% which sounds good. While the market expected 185K new jobs to be created, only 148K were reported but August's job numbers were revised upward from 169K to 193K. That all sounds good for the most part but, and there is so often the but....
We need the private sector to create about 200K jobs per month to really get our economy up to strength. Our employment rate (percentage of people employed) is still in the 63% range and we're creating jobs about as fast as we lose them. The drop in the unemployment rate is from people falling off the unemployment rolls, not from finding a job and the number of continuing unemployed is staying very even. All-in-all, the report was bad for the economy and good for rates.
What to Expect
The end of the week has several reports that are normally of importance but with the government shutdown, our basis for comparison is skewed so they won't hold normal importance. Jobless Claims will continue to be less important than normal because of the shutdown affecting so many contract government employees and government dependent small companies along with the ongoing reporting numbers fiasco from California's computer change over.
If the market can close below 2.5% today and sustain it through week's end, we could see 4% rates in the mortgage markets. Mortgage rates in the high 3's are possible but the resistance from the mortgage investors will be high as they will want some assurances that those rates will be around for a little while to justify issuing securities at the lower rate.
Rates of 4% - 4.25% seem to be safe for now. Famous last words...
Halloween, Pumpkins and Candles
Ever wonder why we place candles in a jack-o'-lantern on Halloween? All Hallows' Eve or Halloween has its origins in ancient Celtic pagan folklore. As part of the festival of Samhain or the celebration of the end of the harvest season, All Hallows Eve is the day when the boundaries between the worlds of the living and the dead overlap. Masks and costumes mimic the evil spirits. As the folklore surrounding All Hallows Eve spread, the Irish added another protection from the evil spirits from the world of the dead. The jack-o'-lanterns or the decorating of a pumpkin has its roots in an Irish folktale of a man named Stingy Jack. Pumpkins were decorated to be scary and candles were placed inside the decorated pumpkin to guard against the evil spirits that were lurking about from the world of the dead. By placing jack-o'-lanterns outside your door, you would scare off the evil spirits. The more terrifying the jack-o'-lantern, the better. So make it as scary as possible!
Mic DeMin will be writing the Friday Financials as I'm travelling to DC to give those politicians a piece of my mind (I wish).
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