Daily Market Update 2/6/09

Mortgage rates held steady Friday following the Non-farm Payrolls report for January. Net job losses totalled 598,000 last month causing the Unemployment Rate to rise to 7.6%. Both figures exceeded forecast. Paradoxically, stocks rose and Treasuries fell on the report. Negative economic news would normally cause the opposite reaction, but in this case traders bet the employment data would increase the odds of quick passage of a large government stimulus package. Such a measure would likely benefit stocks but pressure interest rates due to the large volume of new government debt needed to fund the plan. News of the Senate’s fiscal stimulus proposal and the Treasury’s financial institution cleanup plan may be the biggest drivers of mortgage rates next week. The most significant economic data will be Thursday’s release of January Retail Sales. The market will close early Friday in observance of President’s Day


  1. We just entered into contract on a new home purchase. My question is, would your advice be to hold to see where rates are potentially headed in the coming weeks or lock now and assume that rates will rise?

  2. Thanks for your question. If I were in your situation I would probably wait to see where rates go in the coming weeks. Mortgage rates reached their highest levels since early December this week, largely due to uncertainty over the proposed government stimulus package and the Treasury’s plan to relieve banks of their toxic assets. Investors do not respond well to uncertainty, particularly when it involves interference with the free markets. As a result, additional risk has been priced into mortgage rates. Details of both plans will be known this week which should ease the problem. All indications are that the economy remains mired in a severe recession, with no immediate concern over inflation. No one can predict the direction of interest rates with absolute certainty, but I believe the odds clearly favor floating your rate for the time being.

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