Thursday’s bond market has opened in negative territory as stocks rebound
modestly from yesterday’s sell off that pushed the Dow lower by almost 217
points. The Dow is currently up 32 points while the Nasdaq has gained 10
points. The bond market is currently down 7/32, which will likely push this
morning’s mortgage rates higher by approximately .125 of a discount point.
Yesterday afternoon’s Fed Beige Book report gave us mixed results. It
indicated that economic activity grew modestly in most of the Fed regions
with only one reporting solid growth. Since it did show growth and not much
of a slowdown, we could consider the news negative for the bond market and
mortgage rates. However, many analysts were expecting to see more activity
in more regions, meaning that some consider the data disappointing.
Generally speaking, I consider the report neutral for our purposes-
mortgage rates. There wasn’t much in the release to be optimistic or
concerned about. Although, it is my opinion it does lean a little towards
my theory that the economy does not have the traction or is as strong as
many were predicting. The more data we see that supports that theory, the
more likelihood we will see a sizable drop in stocks soon that would lead
to a nice downward trend in mortgage rates.
The Labor Department announced early this morning that 346,000 new claims
for unemployment benefits were filed last week. This was close to forecasts
of 348,000 and a decline from the previous week’s revised total of 357,000,
making the data negative for the bond market and mortgage pricing as it
hints at a strengthening employment sector. Fortunately, the number was
close to forecasts and the markets are much more interested in tomorrow’s major
data.
Tomorrow morning brings us the release of the almighty monthly Employment
report at 8:30 AM ET. It is arguably the single most important report that
we see each month, giving us key employment readings such as the U.S.
unemployment rate and the number of jobs added or lost during the month.
Analysts are expecting to see that the unemployment rate remained unchanged
at 7.5% in May while approximately 159,000 jobs were added to the economy.
A higher than expected unemployment rate and a much smaller number than the
159,000 new payrolls would be great news for the bond market. It would
probably create a sizable rally in bonds, leading to lower mortgage rates
tomorrow. However, stronger than expected numbers may lead to another spike
in mortgage rates, so proceed cautiously if still floating an interest
rate. Look for it to be an active morning in the financial and mortgage
markets.
If I were considering financing/refinancing a home, I would.... Lock if my
closing was taking place within 7 days... Float if my closing was taking
place between 8 and 20 days... Float if my closing was taking place between
21 and 60 days... Float if my closing was taking place over 60 days from
now...
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