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Mortgage Rates Were Up on Friday as the Jobs Report Showed the Signs of a "Trump Effect"

The average 30-year mortgage rate rose four basis points, to 4.08%, on Friday, which equates to a $482.04 monthly payment per $100,000 borrowed (one basis point equals one-hundredth of a percentage point). A month ago, the equivalent payment was lower by $1.74.

The average 15-year mortgage rate rose one basis point, to 3.23%, equating to a $701.70 monthly payment per $100,000 borrowed. A month ago, the equivalent payment was the same.

Rate (national average)

Today

1 Month Ago

30-year fixed jumbo

4.48%

4.57%

30-year fixed

4.08%

4.05%

15-year fixed

3.23%

3.23%

30-year fixed refi

4.11%

4.09%

15-year fixed refi

3.25%

3.25%

5/1 ARM

3.26%

3.39%

5/1 ARM refi

3.33%

3.60%

5/1 ARM: ADJUSTABLE-RATE MORTGAGE WITH AN INITIAL FIXED FIVE-YEAR INTEREST RATE. DATA SOURCE: BLOOMBERG. RATES MAY INCLUDE POINTS.

Image source: Getty Images.

Mortgage rates are closely linked to the yield on the 10-year Treasury bond. That yield, in turn, reflects the bond market's expectations for future short-term interest rates over the bond's maturity. And short-term interest rates, well, they reflect the Fed's assessment of the economy and its prospects.

This brings us to the most highly anticipated macroeconomic data release: the Labor Department's monthly Employment Situation Report. This morning's report was no different, as economists and investors try to find their bearings during the first 100 days of the iconoclastic Trump administration.

The January report was broadly positive with 227,000 workers added to payrolls, surpassing the consensus forecast of 175,000. As the following graph shows, the figure for January (blue line) is above the trailing 12-month average of 195,000 (red line):

Image source: Federal Reserve Bank of St. Louis.

The unemployment rate ticked up by a tenth of a percentage point, to 4.8%, but the trend reflects an economy that's creating enough jobs to maintain the unemployment rate (green line) at 5% or below. (Note that the participation rate has remained pretty stable over this period.)

While their ardor appears to have cooled somewhat since the actual handover in power, stock and bond market investors took a very buoyant view of economic prospects under the new administration. The narrative was that a businessman in the highest office would act decisively to boost American businesses, and that was plainly enough to raise "animal spirits." Today's data suggests the "Trump effect" probably had a genuine economic impact, but investors need to "watch the downside," too.

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