Mortgage Rates Battered by Positive Jobs Report
Mortgage interest rates increased .25% on Friday as Fannie Mae mortgage backed securities closed down 88 basis points. Since the yield, and therefore the interest rate, moves in the opposite direction of the price, this resulted in some mortgage rates increasing by .25%.
The strong jobs report for October was the catalyst behind the mortgage bond sell off. The October non-farm payrolls showed an increase of 204,000 jobs, while the market was expecting 120,000 jobs. Although this is good news for the economy, it is bad news for interest rates since it means the Fed may begin tapering the $85 billion in mortgage backed securities and long term treasuries that it is currently purchasing every month, otherwise known as QE3 (Quantitative Easing).
Although the stock market initially sold off on the news, the Dow eventually recovered and closed at yet another all-time high of 15,761.
Additional direction on mortgage interest rates should come later this week as we get some important information regarding the economy. The Producer Price Index (PPI) and Retail Sales figures will be released Thursday and the Consumer Price Index (CPI) will be released on Friday.
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