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Forwarded exclusively
by:
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Bob Rosenbaum
The Rosenbaum Lending Group
Office: (703) 879-5200
NMLS#: 649782
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Monday, December 09, 2013
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What happened last week?
Mortgage backed securities (MBS) lost -70 basis points (BPS) from last
Friday's close which caused 30 year fixed rates to move higher for
the third consecutive week. We saw our best rates on Monday and our
worst rates on Friday morning.
Last week was all about jobs and the labor picture. And the picture
certainly brightened. With ADP Private Payrolls, Initial Weekly Jobless
Claims and the Non-Farm Payroll report all coming in better than market
expectations. Friday's Non-Farm Payroll Report came in at 203K vs
market expectations of only 180K. It marked the second straight reading
of 200K or more. The Unemployment Rate fell from 7.3% to 7.0%.
Why do more people going back to work make mortgage rates go up?
Mortgage rates have been artificially too low for two primary reasons.
First, the Federal Reserve purchases $85 billion of Treasuries and MBS each
month which creates higher than normal demand for mortgage bonds which in
return pushes down mortgage rates.. The Fed has made it very clear that
they will begin to lower that amount of monthly purchases once the labor
market improves enough. Most economist are
now projecting that the Fed will begin to "taper" in the first
quarter of 2014. During this summer (when rates were lower) it was
projected that the Fed would begin to taper in the second half of
2014.
Secondly, an improvement in the labor sector means economic growth and growth
leads to inflation. While there is certainly no threat of
inflation in the short term, bond holders look long-term and any inflationary
threat is always negative for bonds and therefore bad for mortgage rates.
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