In January, the U.S. jobs report was strong, and bond yields traded higher in response to this important monthly report. The government reported that U.S. employers added 227,000 new workers in January, above the 170,000 new jobs expected. The unemployment rate rose to 4.8% from 4.7% and the Labor Force Participation Rate (the number of people that are employed and or who are actively seeking work) rose to a four-month high of 62.9% from 62.7%. The U6 number (reflecting the number of part-time workers who’d prefer a full-time position and people who want to work but have given up looking came) in at 9.4%, up slightly from 9.2%.
As discussed previously, interest rates have moved up after the U.S. election in response to a belief that more pro-business policy under the Trump presidency will lead to higher wages and economic growth. So far, while interest rates have risen from multi-year lows, rates are still attractive. These low interest rates will continue to fuel home sales, which is important to the U.S. economy. We continue to monitor interest rates very closely, especially the 10-year U.S. Treasury which is trading at ~2.490%. Key for mortgage rates is that the 10-year U.S. Treasury remains below 3.000%. It would be even better if it remains below 2.500%, which is an important psychological threshold for many investors and borrowers.
We remain biased toward locking in interest rates for clients due to the continued pro-business rhetoric from Washington which could cause rates to move higher and without warning.