Mortgage rates could fall as Treasury yields slip after surprise jobs beat

The 30-year fixed-rate mortgage averaged 6.37% as of May 7, according to Freddie Mac’s weekly survey, up from 6.30% the prior week — with the 15-year fixed at 5.72%. 

However, after the surprise jobs beat, the benchmark 10-year Treasury yield fell more than 4 basis points, reaching 4.35%. The 2-year note slipped more than 3 basis points to 3.88%, and the longer-dated 30-year bond shed a similar amount to settle at 4.937%. 

Wages the real story for rate watchers

While the headline payroll number was the data point that grabbed initial attention, it was the wage figures that most directly shaped the bond market’s immediate reaction.

Selma Hepp, chief economist at Cotality, previously noted that cooler-than-expected wage growth, specifically lower-than-expected annual earnings, would be the signal to push bond yields lower. Friday’s print delivered on that front. 

In April, the Federal Reserve held the federal funds rate steady for the third consecutive meeting, with an unusually contentious 8-4 vote — the most dissent on a single decision since 1992.