Unemployment Figures and Turmoil in EgyptFeb 7 2011
Early in the week, rates hiked slightly as Chinese and U.S. manufacturing growth came in better than expected, and ADP projected some strong private sector job growth. Turmoil in Egypt did cause some fluctuation around rates last week, with concerns subsiding right before they would flare up again. Overall, this turmoil did help spark interest in U.S debt and keep rates slightly lower throughout the week. The latter half of the week was relatively quiet with the country reacting to one of the biggest storms in recent record. The volume of mortgage locks was light, with the lack of supply also helping maintain lower rates.
At the end of last week, however, we received some staggering news that January unemployment dropped to 9.0% vs an expected increase to 9.5%. Rates only increased slightly at first as analysts attempted to understand how this was possible considering that initial reports indicated only 36,000 jobs being created last month. Some are now claiming they expect these job figures to be revised substantially higher in the coming weeks. Rates opened the week a touch higher once again as the market continued to account for this positive employment data, coupled with reduced tensions in Egypt and strong earnings reports out of Europe.
The remainder of the week has fewer economic reports, but is full of other news that may easily drive rates. Egypt continues to draw attention, a spattering of U.S. corporations continue to release year-end earnings, a member of the Fed is scheduled to speak each day this week, and the Treasury has scheduled auctions totaling $72 billion this week.
One thing to keep an eye out for: Some suspect that the government will issue a report discussing the future of the Government Sponsored Enterprises (GSE’s). Namely Fannie Mae and Freddie Mac, these organizations have shaped mortgage origination for the last several decades. If this report is released, expect interest rate volatility as people digest the overall structure and role the government might take in insuring mortgages in the years to come.