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Friday’s bond market has opened down sharply following the release of
some very unfavorable economic news. The stock markets are reacting
positively to the same data, pushing the Dow higher by 77 points and the
Nasdaq up 20 points. While those are moderate gains in the major stock
indexes, the bond market has reacted much more drastically. The 10-year
Treasury Note is currently down 49/32, driving its yield up to 2.68%. That
should translate into a spike in mortgage rates of approximately a full
discount point from Wednesday’s morning pricing.
The U.S. markets were closed yesterday in observance of the Independence
Day holiday and closed early Wednesday. As the markets closed Wednesday
we saw some selling in bonds as investors prepared for the holiday. This
caused some lenders to revise their rates higher while others may have
waited until this morning to reflect that change. However, most of this
morning’s increase is a result of today’s economic data, not Wednesday
afternoon weakness.
Today’s big news came from the Labor Department, who released June’s
employment figures early this morning. They announced that the U.S.
unemployment rate remained at 7.6% last month and that 195,000 new jobs
were added to the economy. The release also showed upward revisions to
May’s and April’s job numbers, adding 70,000 more jobs than previously
announced. The unemployment rate matched forecasts but the payroll number
was 30,000 higher than expected. Even the average earnings reading jumped
more than predicted with a 0.4% increase in earnings.
I am not sure that we could have realistically expected a worse report
for the bond market than we got today. The new payroll increases over the
past three months means we are adding an average of 202,000 jobs a month
over the past six months. There were some bits of interesting data such
as a significant spike in part-time jobs, which are usually taken due to
financial need and are not permanent career oriented positions. Still,
the headline numbers have done the damage this morning as they seem to
support the theory that the Fed will begin easing their bond buying
program (QE3) as soon as September of this year. Unfortunately, today’s
events also helps clear the way for the benchmark 10-year Note yield to
likely continue moving towards 3.0% as predicted last week, bringing
mortgage rates up with it.
Next week brings us few economic reports for the markets to digest, but
the couple that are scheduled will draw a fair amount of attention from
traders. There are also a couple of Treasury auctions on the calendar
that can influence mortgage rates, but with the recent selling in bonds
it is hard to predict a strong demand for them. None of the events will take
place Monday or Tuesday, so we will probably see the most movement in
rates the middle or latter part of the week, although a weak afternoon
for bonds today could lead to an extension into Monday’s early trading.
Look for details on next week’s agenda 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... Lock if my closing was taking place
between 21 and 60 days... Lock if my closing was taking place over 60
days from now...
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