The big news is ADP's National Employment Report. While experts had anticipated that approximately 183,000 jobs were added in February, the actual result was astoundingly higher. That is great for the economy, but bad for mortgage rates today.Â Â Private sector employment increased by 298,000 jobs from January to February.
In addition, January's total was revised significantly higher.
Yesterday's auction of 3-year Treasuries did not go especially well -- another factor pushing rates up. Demand for US Treasuries keeps prices up and yields (rates) down. The opposite is also true. However, 3-year Treasuries are less relevant to long-term debt like mortgages. Today's auction of 10-year Notes should be a better indication of where rates will go later today and early tomorrow.
Stocks are fairly flat this morning, but yields on 10-year Treasuries are up .05 percent -- a significant move, and not a good one for mortgage rates today. CNNMoney's Fear&Greed Index dropped from 70 toÂ 66 this morning.Â Still in the "Greed" range, but moving in the right direction for mortgage rates. (When investors are feeling "greedy," they tend to increase activity, which pushes stock prices higher, fuels inflation concerns, and causes interest rates to creep up.
** FHA APRs include government-mandated mortgage insurance premiums (MIP).Â
These rates are averages, and your rate could be lower. Request a personalized quote from a licensed, reputable lender here.
Tomorrow, like most Thursdays, brings us the Weekly Jobless claims reportÂ from the Department of Labor. Because it reports unemployment claims, it's important. But because it only contains weekly data, it's less important than Friday's report.
Analysts anticipate that 237,000 claims for benefits were filed last week, up from the previous week's 223,000. It would take a major deviation from this number to move interest rates. More claims than expected could push them lower, while a higher figure could increase them.
Rates could go sharply higher if tomorrow's Employment Report from the Labor Department follows today's from ADP. I'd lock unless I really enjoyed gambling.
Note that this is what I would do if I had a mortgage in process today. Your own goals and tolerance for risk may differ.Â
Mortgage interest rates depend on a great deal on the expectations of investors. Good economic news tends to be bad for interest rates, because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.
For example, suppose that two years ago, you bought a $1,000 bond payingÂ five percent interest ($50) each year. (This is called its â€ścoupon rate.") Thatâ€™s a pretty good rate today, so lots of investors want to buy it from you. You sell your $1,000 bond for $1,200.
The buyer gets the same $50 a year in interest that you were getting. However, because he paid more for the bond, his interest rate is not five percent.
Your buyer gets an interest rate, or yield, of only 4.2 percent. And thatâ€™s why, when demand for bonds increases and bond prices go up, interest rates go down.
However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.
Imagine that you have your $1,000 bond, but you can't sell it for $1,000, because unemployment has dropped and stock prices are soaring. You end up gettingÂ $700. The buyer gets the same $50 a year in interest, but the yield looks like this:
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