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Friday’s bond market has opened up sharply following news of much weaker
than expected payroll numbers. The stock markets are reacting as they
should, moving well into negative ground. The Dow is currently down 163
points while the Nasdaq has lost 49 points. The bond market is currently up
22/32, which with strength late yesterday should equate to an improvement
of approximately .375 - .500 of a discount point over Thursday’s morning
pricing.
Today’s big news was the surprisingly weak payroll number in this morning’s
release of March’s Employment. The Labor Department announced early this
morning that 88,000 new jobs were added to the economy last month, falling
well short of the 192,000 that was expected. This wasn’t just a miss from
forecasts. There is a huge difference between 192,000 and 88,000 jobs and
it raises significant concerns about the employment sector, translating
into bigger concerns about the broader economic recovery.
The report did say that the unemployment rate slipped from 7.7% in February
to 7.6% in March. But the third headline reading that tracks average hourly
readings (no change versus 0.2% forecast) gave us favorable results that
offset any impact the unemployment rate decline would have had on this
morning’s trading. That leaves the payroll number to drive the markets this
morning, which is great news for bond traders and mortgage shoppers.
Also posted early this morning was February's Goods and Services Trade
Balance report, but it was of no significance to the markets. It revealed a
$43.0 billion trade deficit that was short of the $44.7 billion that was
expected. This news really couldn’t have had less of an impact on the
markets and mortgage rates with the employment data causing such a stir.
This morning’s bond rally has pushed the yield on the benchmark 10-year
Treasury Note down to 1.68%. While that is great news for current mortgage
rates, it creates a hurdle in the immediate future. If still floating an
interest rate, reap the benefits from today’s news. However, I strongly
recommend proceeding cautiously because it is the quick drop in yields and
mortgage rates that usually leads to a bounce higher as investors sell
holdings to book some of their profits from the rally. This will likely not
happen today, and maybe not Monday either, but we have definitely moved
from a neutral position on the direction of rates to more of a cautious
situation in the near term.
Next week has a handful of things that could influence mortgage rates.
There are a couple of Treasury auctions and the minutes from the most
recent FOMC meeting the middle part and a couple of important economic
reports late in the week. The early part is light with nothing of significance
showing on the calendar at this point, so we may see today’s rally extend
into Monday’s trading. Look for details on next week’s events in Sunday’s
weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my
closing was taking place within 7 days... Lock 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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