Better employment figures announced Friday by the Department of Labor likely means mortgage rates will climb further, according to a mortgage analyst.
The Department of Labor announced 202,000 private sector jobs were added in June, mostly from leisure and hospitality (75,000 jobs), professional business services (53,000), retail trade (37,000), and financial services (17,000, more than double its prior 12-month average). Total non-farm payroll employment for April and May was also adjusted upwards to 70,000.
The positive economic news is not so positive for mortgage rates, however, said Bryan McNee, analyst at MBS Authority.
Positive economic data generally means that the Fed is more likely to scale-back on MBS purchases sooner. When MBS supply rises, prices will fall, causing mortgage rates to increase, he said.
Last week and this week, traders actively sold off their MBS to get ahead of any Fed actions, causing a drop in MBS prices and a rise in rates, McNee said.
“After the last two Non-Farm Payroll reports, mortgage backed securities (MBS) sold off in a major way which pushed mortgage rates upward,” McNee said.
Last week, there was a slight pull-back in expectations that the Fed would reduce purchases in the Fall, causing interest rates to fall slightly, McNee said. “But [Friday’s] better-than-expected payroll data continued MBS’ downward path by at least -100bps,” causing mortgage rates to tick-back up to their highs of 2013, he said.