Friday’s bond market has opened up sharply following the release of much weaker than expected employment data. The stock markets are not trading today due to the holiday. The bond market is currently up 23/32 (1.83%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.
Today’s only relevant data was the almighty monthly Employment report from the Labor Department. They announced early this morning that 126,000 new jobs were added to the economy last month while the unemployment rate remained at 5.5%. The unemployment rate pegged forecasts but the payroll number was well below the 248,000 that was expected and the weakest monthly number since December 2013. In addition, downward revisions to January and February’s numbers removed 69,000 jobs from the year-to-date total. Some are attributing the soft number to bad weather and the drop in energy costs and not a true reflection of the strength in the sector. While there likely is some legitimacy to those theories, we will not know just how heavily they weighed on the payroll number until we get to April’s numbers early next month.
The payroll number is clearly good news for the bond market and mortgage rates. However, a bit of negative news is another increase in average hourly earnings. Today’s report showed a 0.3% rise in earnings, exceeding forecasts of a 0.2% increase. This isn’t a big enough of a variance to derail this morning’s bond rally, but if the payroll number was close to expectations, this earnings reading would have drawn much more attention than it has received so far. Since traders don’t seem to be concerned with it at the moment, we won’t dwell on it either. Although, I am certain it will be discussed as we get closer to the release of April’s numbers.
Keep in mind that the bond market will close today at noon ET in observance of the Good Friday holiday. The stock markets are closed today and will reopen Monday morning for regular trading. I would not be surprised to see some volatility in bonds right up until noon with a possibility of lenders making rate changes shortly after. Even though many lenders are open for business today, I suspect it will be a pretty quiet afternoon with the markets closed.
Next week brings us little in terms of relevant economic data to be concerned with, but we do have a couple of Treasury auctions and the minutes from the most recent FOMC meeting that could affect bond trading and mortgage rates. None of the week’s events are scheduled for Monday, so we residual momentum from today’s news is likely to drive trading when stocks have their first opportunity to react to the employment data. Look for details on next week’s events in Sunday evening’s weekly preview.