Labor Day closes US markets: 30-year holds at 6.89%, last read from Friday's session. August payrolls beat expectations — 162,000 jobs, unemployment at 4.1% — yet bond markets barely moved. CPI mid-week is the next test.
Markets are closed today. The last live read on mortgage rates — Friday's session — left the 30-year conventional at 6.89%, up one basis point on the week. The jobs report landed Friday morning and came in stronger than expected: 162,000 payrolls added, unemployment holding at 4.1%. Bond markets absorbed it with less turbulence than the number would typically produce. The 10-year Treasury closed near 4.78%, MBS pricing finished slightly weaker — UMBS 6.0 near 101, UMBS 5.5 near 98.87.
The muted reaction to a strong jobs print was largely a Fed story, not a bond story. Governor Waller signaled Thursday that he supports holding rates steady at September's FOMC meeting. That held a lid on yields even as the payroll number came in above expectations. The market's real question heading into this week isn't whether the Fed hikes in September — Waller's signal mostly took that off the table — it's whether hotter data between now and the September 17 decision changes the calculus. August CPI, expected mid-week, is the next number that matters.
For borrowers, the picture is firm but not moving fast. Rates at 6.89% are near the top of the range they've occupied all summer. The NFP data reinforces that the economy isn't in the kind of distress that forces the Fed's hand toward cuts. What keeps rates from climbing further is a ceiling set by bond market expectations: if traders believe the Fed is done, or nearly done, Treasuries find support. What prevents a meaningful drop is an economy still producing jobs and an inflation mandate that hasn't been fully declared satisfied. That spread — between "done" and "almost done" — is where mortgage rates are going to live for a while.
Trading resumes Tuesday. CPI prints mid-week. Every Fed speaker between now and September 17 is worth watching. If inflation data surprises to the upside, yields will test higher — 5% on the 10-year has entered the conversation. If it comes in soft, the September hold becomes more comfortable and rates could find modest relief.
— David Burson, NetRate Mortgage