|
Thursday’s bond market has opened in negative territory following
unfavorable results from this morning’s economic data. Those same reports
are helping to boost stock prices during early trading that has the Dow
higher by 73 points and the Nasdaq up 24 points. The bond market is
currently down 3/32, but due to weakness late yesterday we could see an
increase in this morning’s mortgage rates of approximately .125 -.250 of
a discount point over Wednesday’s morning pricing.
The Labor Department posted two of this morning’s releases, but neither
of them is considered to be highly important. One was the weekly
unemployment update that showed a smaller than expected 324,000 new
claims for unemployment benefits. Since analysts were expecting to see
approximately 346,000 new claims and this is the lowest total since
January 2008, we should consider this data negative for the bond market
and mortgage rates.
They also announced that 1st Quarter Productivity rose 0.7% during the
first three months of the year when forecasts were calling for a 1.2%
increase. This means that workers were not as productive per hour worked
as many had thought, also making the data unfavorable for the bond and
mortgage markets. Worth noting in this release though was a 0.5% increase
in the Unit Labor Costs reading that was less than a third of the 1.6%
increase that expected. The lower reading there is considered good news
for mortgage shoppers because it indicates that employer costs for labor
did not rise as quickly as thought, easing inflation concerns.
March's Goods and Services Trade Balance report was today’s third and
final piece of economic data, also at 8:30 AM ET. It revealed that the
U.S. trade deficit fell to $38.8 billion in March, well short of the
$43.0 billion that was expected. However, this data is a little aged and
does not carry much significance in the bond or mortgage markets.
Therefore, it has had little influence on this morning’s trading and
mortgage pricing.
Tomorrow has two more pieces of economic data set for release, including
one that is arguably the single most important report we see each month.
That would be the monthly Employment report at 8:30 AM ET tomorrow. It
will give us April’s employment statistics, such as the unemployment
rate, number of jobs added or lost during the month and average hourly
earnings. This data can cause a huge rally or major sell-off in the bond
and financial markets and potentially large changes in mortgage rates.
The ideal situation for the bond and mortgage markets would be an increase
in the unemployment rate and a much smaller number of payrolls added to
the economy during the month than was expected. Just how much of an
improvement or worsening in rates depends on how much variance there is
between forecasts and actual readings.
This could turn out to be a wonderful day in the mortgage market, but it
also carries risks of seeing mortgage rates move higher if the Labor
Department posts stronger than expected readings. In fact, I believe we
need to see much weaker than forecasted numbers for the bond market to
really rally. Just a small miss or even matching forecasts could lead to
bond selling and higher mortgage rates because, in my opinion, some
market traders are expecting to see soft numbers. Current forecasts are
calling for the unemployment rate to remain at 7.6% and that
approximately 155,000 jobs were added during the month.
March's Factory Orders data will be posted late tomorrow morning, giving
us another measure of manufacturing sector strength or weakness. It is
similar to last week's Durable Goods Orders, except this report includes
non-durable goods such as food and clothing. Generally, the market is
more concerned with the durable goods orders like refrigerators and
electronics than items such as cigarettes and toothpaste. This is why the
Durable Goods report usually has more of an impact on the financial
markets than the Factory Orders report does. Still, a noticeably larger
decline than the 2.5% that is expected could push mortgage rates slightly
lower if the employment report results don’t heavily influence trading.
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... Lock if my closing was taking place
between 21 and 60 days... Float if my closing was taking place over 60
days from now...
|
No comments:
Post a Comment