Important News Re Interest Rates Tomorrow (Dec 8)

Ladies and Gents, Brokers and Agents,

We have some big news on the horizon that could easily establish a new trend in interest rates for the next month or so.  And that new trend is not "even better rates."  What I'd like to do is give you a brief understanding of what we can expect at the end of this week so that you can make the appropriate decisions for your borrowers.

Today, Mortgage bonds are slightly lower as traders gear up for tomorrow's important Jobs Report.  

This morning, Initial Jobless Claims was reported at 324,000 which was in line with expectations.  Bonds had little reaction to the release.    

All eyes are now focusing squarely on tomorrow’s Jobs Report.  While the consensus estimate is for a gain of 105,000 new jobs, economists have expectations all over the board, ranging from a low of 40,000 to a high of 217,000 new jobs. This wide range depicts the high level of uncertainty surrounding tomorrow's number.

Essentially here's the plan I propose.  Consider all the factors that will are helping set the tone for tormorrow's release:  

- Yesterday's strong ADP Report (ADP reported yesterday that they were expecting 195,000 new jobs, almost two times the consensus)
- The higher revisions of recent Job reports (we've had some pretty serious upward revisions in the past few months)
- A later release date for this month's Jobs Report (later releases usually lead to more accurate figures)
- The slew of negative technical signals and the risk-reward factor (we've had an extremely non-eventful market run since the week of Thanksgiving, so investors will likely pounce harder on any number that varies significantly from predictions)
- We're approaching the peak of a Double Top trading pattern (for the uninitiated, that's Japanese Candlestick terminology which typically signals an upcoming trend reversal.  See chart below)

(Don't forget to take a peek at my recommendation beneath the chart.)

There is a chance that, if numbers come in in our favor (lower than expectaions of even near forecasts), we could see rate improvements, or at least holding steady at current interest rate levels.  However, the downside is too strong for us to take any serious risks.  For those of you who have customers on cusp of making any decisions, or if you have a client that you know is currently floating their rate, I feel it is wise to have a bias towards locking today in advance of tomorrow's release.