Lake Tahoe Home Loans and Lake Tahoe Mortgage Loan Rates:
Thursday’s bond market has opened well in negative territory, extending yesterday’s late selling. The stock markets are calm with the Dow up 11 points and the Nasdaq up 7 points. The bond market is currently down 20/32, which with yesterday’s afternoon selling is likely going to push this morning’s mortgage rates higher by approximately .375 – .500 of a discount point if comparing to Wednesday’s morning pricing. The selling that began yesterday has also pushed the yield on the benchmark 10-year Treasury Note to 2.97%. This is its highest level since late July 2011 and raises some concern about mortgage rate direction.
Yesterday’s afternoon release of the Fed Beige Book did not give us any major surprises. It revealed modest to moderate economic growth in most of the Fed regions, nearly mirroring the previous release. The problem for bonds and mortgage rates was the fact that it didn’t do anything to indicate the Fed may NOT taper at their next FOMC meeting September 17-18th. If the general consensus was the Fed is not going to start winding down their current bond buying program (QE3) at this meeting, the report would have been taken as a positive for the bond and mortgage markets. Unfortunately, a clear sign that Chairman Bernanke and friends will not make that move is needed because so many people have this upcoming meeting as the first step towards ending those purchases of mortgage-related securities.
There were three relevant economic reports posted this morning, but none were considered highly important to the markets or mortgage rates. Not that you could tell by this morning’s bond selling. The Labor Department gave us the first two with last week’s unemployment figures and a revised worker productivity reading from last quarter. They announced that 323,000 new claims for unemployment benefits were filed last week, down from the revised total of 332,000 of the previous week. This is negative news for the bond market and mortgage pricing because it signals a strengthening employment sector, at least if looking at only a weekly snapshot. This is especially true since analysts were expecting to see little change from the previous week and we will get the monthly report tomorrow morning.
The revised 2nd Quarter Productivity numbers actually gave us favorable results but with the report not considered highly important it did little to derail this morning’s bond selling. The report revealed that worker productivity grew at a 2.3% annual pace, up from the initial estimate of 1.5%. Also, a secondary reading that tracks labor-related costs went from up 1.0% to no change from the first quarter. Both of these readings are considered good news for the bond market, but unfortunately are falling on deaf ears this morning.
August’s Factory Orders was the third report posted this morning. The Commerce Department reported at 10:00 AM that new orders at U.S. factories for both durable and non-durable goods fell 2.4% in July. While a decline points towards a slowing manufacturing sector, analysts were expecting to see a 3.7% drop, meaning that new orders were better than many had thought. That makes the data negative for the bond market and mortgage rates, but I don’t believe that this data is significantly affecting this morning’s trading. We saw a good portion of this data in last week’s Durable Goods orders report, which carries more importance in the markets. Still, it is a piece of data that is not good news for mortgage shoppers.
Tomorrow morning brings us the release of the almighty monthly Employment report. This data is arguably the most important report that we see each month. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August at 8:30 AM ET tomorrow. The ideal scenario for the bond market and mortgage rates is rising unemployment, a drop in payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate remained at 7.4% and that 177,000 jobs were added during the month. Weaker than expected readings would signal softer employment sector growth than predicted and would be very good news for bonds and mortgage rates. However, if we get noticeably stronger than expected numbers, mortgage rates will probably spike higher tomorrow morning.
This report has even more significance this month than it usually does, which seems difficult to believe is even possible. But this is the last major employment sector reading before the next FOMC meeting and the Fed has partly targeted their tapering plans to growth in employment. If tomorrow’s report shows stronger than expected employment numbers, it may be enough for the Fed to take the first step in winding down their current bond buying program later this month. On the other hand, unexpected weakness in the numbers could cause them to delay the tapering that many are expecting. So, besides just an employment sector reading, this month’s numbers will also help us predict the Fed’s move less than two weeks later. This doesn’t alter our wishes though regarding its results. Weaker numbers indicate economic weakness and raises the possibility of the Fed delaying their move, both of which are good news for the bond market and mortgage rates. There is a very high! possibility of seeing a great deal of volatility in the financial markets and movement in mortgage rates tomorrow