Mortgage market update

[Jesse Gonzalez]

What Happened to Rates Last Week?Mortgage backed securities (MBS) lost - 78 basis points from last Friday's close which caused 30 year fixed rates to move higher from the prior week.

MBS were under pressure all week (which drives mortgage rates upward) on three factors: First, we had some very strong economic news with ISM Manufacturing and Servicing, Auto Sales and a positive tone in the Fed's Beige Book. Secondly, the bond market reduced some of its "fear factor" premium as news stories made it clear that a U.S. strike against Syria would not occur during the week. And lastly, bond traders were betting that Friday's employment data would be stronger than expected.

All of the above caused mortgage rates to hit their highest levels in three years.

And then the much anticipated Non-Farm Payroll (NFP) data hit on Friday.

The market was expecting a reading in the range of 175K to 181K with "whisper numbers" above 190K. But NFP came in at 169K. Plus, July's reading of 167K was revised downward to an absolutely terrible number of 104K.

This weaker than expected jobs data caused MBS to reverse course from the week-long sell off and regained some of their losses. This helped mortgage rates improve from earlier in the week but we still closed down for the week.

This Week's Mortgage Rates Forecast

Mortgage Rates Currently Trending: NEUTRAL

This week should give us a bit of a respite from the severe volatility last week caused by the economic data that was released.We have another big week for MBS trades. Not only do we have some very important economic reports but we also have a huge supply of Treasury auctions to contend with, a Congressional vote on Syria, a monthly bond coupon roll over, and this is the last week before the next Fed meeting.

Treasury auctions this week:
09/10 - 3 year note
09/11 - 10 year note

09/12 - 30 year bond.