Friday's payroll report was as weak as the market had any right to ask for — down 23,000 against an 80,000 consensus, 103,000 revised away from prior months, wage growth cooling to 3.2% — and it was worth about three basis points in the 10-year and a quarter point in MBS. Mortgage News Daily called it what it was: a rally, but not the one you'd expect. The 10-year's last published close, August 6, was 4.69%, so the improvement leaves it in the mid-4.6s. Yesterday's pulse made the point that the rate sheet had finally followed the bond rally down to 6.75%; this morning it gave that basis point straight back, with the national 30-year at 6.76%. Three basis points on the week, twenty on the month. The size of the reaction is the information here — when a labor contraction only moves the tape a few basis points, the bid isn't being driven by growth expectations, and a second weak print won't do much more than the first one did.
On deck: CPI's release window opens August 10 and runs through August 15, and after Friday it is clearly the bigger lever of the two. Jobless claims and the Freddie Mac survey both land August 13, with housing starts and permits August 16 through 18. Claims came in at 199,000 and have been flat for weeks, so they go in with no directional prior. The next FOMC meeting is September 15–16 and it carries a Summary of Economic Projections. The technical picture is tight: 6.82% has capped this move twice and 6.45% was the floor in May. Nothing between those two levels changes the conversation you are having with borrowers.
Where we sit: 6.76% is above the 6.69% thirty-day average and six basis points under the 6.82% ninety-day high, thirty-one above the ninety-day low. That is the upper third of the range, not the middle, and it has been for two weeks. Nobody who was quoted in the last ninety days is looking at a better number today than the one they were given.
The interesting spread this week is between products, not between days. FHA is at 6.28% and VA at 6.30% against conventional's 6.76% — a forty-eight basis point gap that runs about $126 a month on a $400,000 loan, which is wide enough to change the answer for a borrower sitting at 620 to 680 credit who defaulted to conventional in the pre-approval. The 15-year is at 6.12% and the 5/1 ARM at 6.29%, and jumbo at 6.85% is only nine basis points over conforming, which is unusually tight. Pull the pre-approvals you issued in the last sixty days that are FHA-eligible but structured conventional and re-run them both ways before Monday. Do this today: build that dual-scenario list and put a payment comparison in front of the three files closest to contract.