No later than 11:59 p.m. ET tonight President Obama will be forced to give the order for $85 billion of across-the-board government spending cuts to begin. Barring any last minute political breakthrough, Uncle Sam’s belt tightening – known as “sequestration” in the press — will be “a done deal”. The impact of the government spending cuts won’t really be felt or clearly reflected in forthcoming economic data for many weeks or probably months to come.
It all sounds pretty dramatic – but Congress and the White House can rescind these big spending cuts at any time they decide to. The structure of the legislation mandating “sequestration” is really not automatic – it is not a “card laid is a card played” kind of thing. What will happen from today forward will be weeks and perhaps months of political bickering and saber rattling to buy time for Congress and the White House to come up with a viable plan to kick-the-can-down-the-road and simultaneously lay the blame for any pain suffered by the voters squarely at the feet of the opposing party.
My sincere hope is political courage and leadership among all the parties involved will emerge and decisions for the common good of the country and its long-term fiscal soundness will prevail. My expectation is that Congress and the White House will once again prove to its global creditors that it is woefully lacking the ability to make any sustained commitment to address the nation’s rapidly deteriorating financial condition. The latter scenario, should it actually develop, will have an increasingly burdensome impact on the ability of mortgage interest rates to move notably lower from current levels.
Looking ahead to next week — Tuesday’s Institute of Supply Management Service Sector Index will take a distant back seat to Friday’s February Nonfarm Payroll report.
Mortgage investors have already priced-in expectations for a February headline jobs number of 165,000 and a national jobless rate holding steady at 7.9%. If the actual numbers match or closely approximate the consensus estimate — this report will have little, if any, noticeable impact on the trend trajectory of mortgage interest rates. A headline nonfarm payroll number greater than 170,000 and/or a national jobless rate of 7.8% or less is almost certain to push mortgage rates higher. While a stronger-than-expected February payroll report is possible – at this juncture it is not deemed to be very probable.
Mortgage Rates as of March 1, 2013 ( purchase transactions )
30 day rate locks, subject to credit score and loan to value edits
30 year fixed 3.25% ( 0% Origination Fee )
30 year fixed rate 3.50% (*LTV and credit score could impact this quote) ( .50 origination fee, 760+ score)
15 year fixed rate 2.875%
5/1 ARM 2.625%
7/1 ARM 2.875%