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Mortgage Rates Drop Quickly After Jobs Data

Mortgage rates fell abruptly yesterday, after the long-awaited Employment Situation Report painted a bleaker-than-expected picture for labor markets.

The report was originally scheduled for October 4th, but was delayed due to the shutdown. Conforming 30yr Fixed rates (best-execution) moved down to 4.125% for many borrowers depending on the scenario, though some lenders remain at 4.25%.

To say that financial markets had been eagerly anticipating the release of this data is an understatement. Apart from a brief spat of volatility leading into and away from the debt ceiling deal, the absence of this jobs report has been the driving force for rates markets--acting to prevent any convicted movement in either direction.

As those barriers were lowered today, and as the report spoke to ongoing labor market weakness, bond markets improved significantly, including MBS, the "mortgage-backed-securities" that most directly influence rate sheets. When MBS prices improve, rates fall--all things being equal.

Weak economic data historically pushes rates lower and today is no exception, but that's not the whole story. The ancillary effect of today's data is that it further confirms that the Fed is likely to hold off on reducing its purchases

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Matthew Graham