All of us could take a lesson from the weather. It pays no attention to criticism, right? Critics are still blasting the TSA for allowing an alleged Nigerian terrorist to board a plane headed to Detroit on Christmas day. Experts say screeners missed several suspicious behaviors, especially the fact that someone was willingly going to Detroit.
The big news yesterday, if there was any, were the minutes from the mid-December Fed meeting (with the usual 3 week lag). The Federal Open Market Committee (FOMC) still sees a modest recovery this year, e.g., one that will bring only a “slow improvement” in the nation’s severe unemployment problem. Although the FOMC’s role is not to provide jobs, employment is still a concern, and they expect unemployment to remain elevated for quite some time. But of most interest to mortgage lenders is the appearance that they are in no hurry to raise overnight Fed Funds which have been near 0% for over a year. In addition, a weak recovery could warrant expanding or extending the $1.25 trillion mortgage-backed securities purchase program, although there is no change now. Winding it down, the minutes stated, may hurt housing since the securitization markets are still “impaired”, and the commercial sector is still deteriorating. If you’re interested in the 12 pages of minutes check them out HERE.
In the meantime, ahead of tomorrow’s unemployment data we had yesterday’s ADP Employment Report (which showed that the private sector dropped 84,000 jobs in December, ADP’s 23rd month in a row of declines – “employment losses are now rapidly diminishing”) and today’s weekly Jobless Claims data. Today’s number showed that the number of U.S. workers filing new applications for unemployment insurance rose less than expected last week (up only 1,000 to 434,000) and the 4-week moving average hit a 16-month low at 450,000. Yesterday’s jobs data, however, was enough to push rates higher during the day, resulting in several investors changing prices. (Mortgage prices did better than Treasury prices, presumably due to lack of supply versus the Fed buying.) Ahead of us we still have the supply announcement for next week’s auction of 3’s, 10’s, 30’s and 10yr TIPS, but for now the 10-yr yield is back up to 3.84% and mortgage prices are worse between .125 and .250.