Rates Hinge on Friday’s Employment Numbers

Long term rates rose, led by the 30-year fixed rate mortgage average which jumped 12 basis points (BPS) from last week to 5.52%, according to Freddie Mac’s latest Primary Mortgage Market Survey. Last year at this time, the average stood at 5.79%.

Up by 14 basis points, Freddie averaged the 15-year at 4.84%.

Even the 1-year Treasury adjustable-rate mortgage average jumped this week — up 10 basis points to 3.46% –breaking away from a 7-week descending trend and from the lowest level it’d been at in over 20 years, Freddie said. Meanwhile, the cost of funds index, or COFI, edged up 3 BPS to 1.841% in February, according to the 11th District Federal Home Loan Bank. ARM applications comprised 27.5% of total mortgage applications, the Mortgage Bankers Association of America (MBA) reported, down from 28.1% the previous week.

In late afternoon trading Thursday, the 10-year Treasury note yield was 3.90% and the price was 100 25/32. A week ago, it closed at 102 4/32 with a yield of 3.74%.

“In advance of what is hoped will be a strong jobs report tomorrow, bond yields rose this week and, predictably, so did mortgage rates,” said Freddie’s chief economist Frank Nothaft in a written statement. “The economy has been conducive to job gains for several months, but we have yet to see any significant rise in employment.”

A senior financial analyst at Bankrate.com was in the same train of thought.

“The run-up in rates this week will be quickly erased if Friday’s employment report falls short of expectations,” Greg McBride said. “But, if any significant measure of job creation is evident, rates will trend higher.”

A majority — 64% — of the mortgage industry experts surveyed by Bankrate.com predicted that rates will head up in the next month and a half, while 27% voted rates would remain unchanged (plus or minus 2 BPS) and 9% foresaw a downturn.

Meanwhile, overall mortgage application activity continued to slip for the second week in a row, MBA said. This was shown by a 2.1% dip from the previous week to 1091.3 in the Market Composite Index, according to group’s latest Weekly Mortgage Application Survey. A year ago, this index stood at 1262.5.

The Refinance Index decreased by 2.6% from the previous week to 4857.6, while the share of refinance applications fell slightly to 62.8% of total mortgage applications, the Washington D.C.-based group said.

The MBA said the Purchase Index edged down 1.1% to 443.8.