Daily Commentary by Larry Baer: Selling pressure in the mortgage market developed
again this morning as stronger-than-expected jobs data boosted investor
appetite for riskier assets like stocks. According to private payroll
firm ADP private employers' added 198,000 jobs in February - the largest such
monthly increase in a year and well ahead of the consensus estimate among
economists calling for a gain of 170,000 jobs. The ADP data is hinting
Friday's much more important February nonfarm payroll headline may post a
reading of 167,000 or so as opposed to the projected gain of 165,000 new
jobs. The vast majority of analysts do not believe the February payroll
gain will be sufficient enough to cause the national jobless rate to edge down
from its current 7.9% level. In my judgment the investors
have already priced in a slightly stronger than expected headline nonfarm
payroll figure - so anything less than 170,000 new jobs and an unemployment
rate of 7.9% is unlikely to have much of an impact on the current trend
trajectory of mortgage interest rates.
In other news of the
day - the Commerce Department reported January Factory Orders dropped 2.0% --
the sharpest decline in five months - weighted down by a sharp decline in
military hardware and commercial aircraft. Mortgage investors took a look
at the data - and yawned.
As they do every
Wednesday, the Mortgage Bankers of America released their Mortgage Application
Survey earlier this morning. After three consecutive weeks of falling,
mortgage application traffic bounced back strongly. The composite index
rose by 14.8% during the week ended March 1st - with refinance
demand up a matching 14.8% and purchase money requests climbing by 15.0%.
For the week, refinance applications accounted for 77% of all applications and
72% of the perspective loan volume.
The contract for
30-year fixed-rate mortgages fell by 7 basis-points to 3.7%. The interest
rate is 3 basis-points lower from four weeks ago and 36 basis-points from
year-ago levels.
Looking ahead to
Friday -- mortgage investors have already priced-in expectations for a February
headline jobs number of 167,000 and a national jobless rate holding steady at
7.9%. If the actual numbers match or closely approximate the consensus
estimate -- this report will have little, if any, noticeable impact on the
trend trajectory of mortgage interest rates. A headline nonfarm payroll
number greater than 170,000 and/or a national jobless rate of 7.8% or less is
almost certain to push mortgage rates higher. While a
stronger-than-expected February payroll report is possible - at this juncture
it is not deemed to be very probable.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
