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Mortgage rates went down this week; here’s why

The disconnect between markets, data and the Fed has widened
  • Vice Chair Fischer said the market estimation of future rate hikes is “too low,” and four hikes this year are “in the ballpark.”
  • The Fed is desperate to get the cost of money up toward 2 percent at minimum, justifiably worried that it can’t be caught down here when we have the inevitable rebound in energy prices.

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Jobs up, economy better, which reinforces Fed tightening ahead, but mortgage rates went down this week. The world today is one huge furball of disconnections like this, and the mission below is to unravel the tangle into understandable threads. At dawn this morning, news of December payrolls: 292,000 new jobs, half again the forecast, unemployment the same at 5 percent, and hourly earnings down (down) $0.01. Long-term rates rose at the outset, since have fallen back, mortgages about 4.00 percent. Bond traders are a skeptical lot, and I don’t know anyone who believes the magnitude of this job gain. All other data from December weakened. The twin ISM (Institute for Supply Management) surveys: manufacturing is shrinking, falling steadily below “50” breakeven to 48.2; the service sector companion was forecast to rise from November’s 55.9 and instead fell to 55.3. The Atlanta Fed forecasts 4th quarter GDP growth below 1 percent annualized. The disconnect between m...