Interest rates dip

Interest rates moved up slightly this week, and have increased about 1 percentage point over the last month from their historic lows.The following are excerpts from the newsletter on interest rates published by HSH Associates :

“Mortgage rates managed to ease back this week, but don’t get used to them heading in that direction. A solid employment report on Friday was sufficient to stem the slight downward move in that direction which was in place for most of this week. Without some softer economic data to offset the job report, mortgage rates will likely firm up again.

The employment report was solid, but not spectacular. However, the report also included upward revisions to both April and May hiring figures, leaving the second quarter of 2013 in fairly solid shape. Even though the second quarter’s average rise was a little below the first quarter’s 207,000, the reports were uniformly solid during all three months. By contrast, the first quarter featured two pretty weak months bookending a very strong one.

By itself, does the report sufficient to put the Fed “in play” for a September start for ‘tapering’ QE3? No, but it does make it less likely that there will be much delay beyond that.

Mortgage rates managed a little dip this week, as the outsized market reaction from the last Fed meeting subsided, at least though July 3. However, the firm employment report on Friday generated another strong upward move in interest rates, and that puts us on track next week to move higher again. Late Friday, the influential 10-year Treasury yield had risen by some 20 plus basis points from Wednesday, and that should be more than sufficient to wipe out this week’s dip and then some.

Failing a spate of softness in the coming data — and next week features a fairly light calendar in that regard — the feature of the week will be the minutes of the last Fed meeting, which exacerbated the rout Mr. Bernanke initiated way back in May. Unless there’s something in the minutes to suggest otherwise (unlikely) we will expect to see rates rise by 10-15 basis points next week as volatility continues.”

One thing that some economists pointed out when evaluating the jobs report, was that all of the net increase in jobs were from temporary jobs, and not permanent jobs, and that the number of permanent jobs has been going down, not up. The economy is actually much weaker than the numbers suggest.

The following are interest rate quotes from Al Hermann of American California Financial: