Mortgage-backed securities (MBS) improved last week amid stronger-than-expected economic data, including the U.S. jobs report for October.

Normally, an improving jobs economy would lead mortgage rates higher but the unexpected effects of Hurricane Sandy, which forced the exchanges closed for 36 hours and which has caused an estimated $50 billion in damage sparked some safe haven buying.

The Fannie Mae 3.0% coupon closed the week +8/32. Conforming and HARP mortgage rates improved. FHA Streamline Refinance mortgage rates moved lower, too, nearing an all-time record.

Mortgage Rates Lower On Hurricane Sandy

Mortgage markets were interrupted last week by Hurricane Sandy. As the storm moved up the East Coast, through Virginia, Washington D.C., Pennsylvania, New Jersey and New York, on its way inland, financial regulators pushed to close the U.S. bond markets Monday afternoon. And so it was.

Bond desks remained closed Tuesday as well as storm damage decimated lower Manhattan plus other parts of the New York metropolitan market.

While markets were closed, little economic data was released to move mortgage markets. Upon the re-open Wednesday morning, however, global traders began to assess the short- and long-term damage from the storm, and to prep for Friday's release of the October Non-Farm Payrolls report.

Initial estimates put the Hurricane Sandy physical damage toll at $50 billion. The effects on the U.S. economy, however, may be larger after accounting for lost productivity, reduced business output, and smaller consumer spending levels.

These "after-effects" are among the reasons why mortgage rates improved mid-week last week. Wall Street believes that Hurricane Sandy created drag on the growing U.S. economy.

25 Straight Months Of Job Growth

Mortgage rates also improved after the release of Friday morning release of the U.S. Non-Farm Payrolls report for October 2012.

According to the Bureau of Labor Statistics, 171,000 net new jobs were created last month which blew past economist expectations of 125,000 net new jobs. Furthermore, adjustments to the August and September job tallies totalled 84,000, widening the gap between expected job creation and actual job creation further.

A growing U.S. workforce supports economic recovery because workers spend paychecks on goods and services, which improves the balance sheets of business and of state and local governments.

Despite more people in the ranks of the employed, the national Unemployment Rate moved one-tenth of a percentage point higher to 7.9% in October. This anomaly is the result of a growing labor force and does not suggest a "weaker" U.S. economy. To the contrary, with more people actively looking for work, it's another signal of consumer confidence, an opinion backed by Consumer Confidence rising to its highest levels since February 2008.

This Week : Mortgage Rates May Drop Again

There is very little economic news planned for release this week, but MBS markets may remain volatile. Most notably, the U.S. elections are Tuesday. Regardless of how the races finish on the state and federal levels, markets will react to the outcomes. Rates will get volatile Tuesday morning and may remain so through the end of the week.

In addition, mortgage markets will react to the three planned U.S. Treasury auctions. Scheduled for Tuesday, Wednesday and Thursday, strong demand for treasury should help pull mortgage rates down. Weak demand should lead rates up.

Mortgage rates remain near all-time lows. Get a rate quote and lock yourself in.

Manuel Gonzalez

(732) 474-8180