BLOW-OUT EMPLOYMENT NUMBERS FAIL TO BUDGE LENDING RATES
Employment has a major effect on interest rates, and December’s numbers look spectacular. Payrolls soared 292,000, obliterating economist’s predictions. What’s more, October and November payrolls were adjusted up a total of 50,000.
With payrolls trending ever higher, interest rates were expected rise, but they didn’t. In fact, the rates on the 15 and 30 year fixed-rate offerings are being quoted near a two-month low.
It seems that Macro events are holding rates down. China’s stock market has tanked to start 2016. The S&P 500 is down 6% year to date. And remember a few years ago when economists were prepping for life with $100 barrels of oil? Oil recently hit an 11-year low, with West Texas crude trading near $30/barrel. Commodities in general – oil, natural gas, metals, grains – are all selling near multi-year lows.
Despite this, inflation is still key. If there is no inflation, expect long-term mortgage rates to remain low. There is such a dearth of inflation these days that we’ve heard forecasts of the yield on the 10-year Treasury note falling below 2%. If that occurs, you can be sure that quotes below 4% on the 30-year fixed-rate loan will again be the norm.