Wednesday’s bond market has opened in negative territory again, extending Tuesday afternoon’s sell-off. The stock markets are taking a breather after yesterday’s rally that drove the Dow higher by over 300 points. The major stock indexes are showing minor losses of 18 points in the Dow and 26 points in the Nasdaq. The bond market is currently down 7/32 (1.82%), which with yesterday’s late selling should push this morning’s mortgage rates higher by approximately .375 of a discount point if comparing to Tuesday’s early pricing.
Today’s only worthwhile report was the January ADP Employment report at 8:15 AM ET. It revealed that 213,000 private-sector jobs were added during the month, falling short of the 230,000 that was expected. The softer than forecasted number is technically good news for bonds and mortgage rates, but the overall negative tone in the bond market is too strong this morning for this data to have a positive impact on mortgage rates.
Tomorrow has two pieces of economic data scheduled for release at 8:30 AM ET. Neither of them is considered to be important to the markets or are likely to cause a noticeable move in mortgage rates. Employee Productivity and Costs data for the 4th quarter is one. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If the productivity reading varies greatly from analysts’ forecasts of a 0.2% increase, we may see some movement in mortgage rates. Higher levels of worker productivity is good news for the bond market because it allows the economy to expand while keeping inflation subdued. Also worth noting is the labor cost reading that bond traders would prefer to see decline in to limit wage inflation concerns.
Last week’s unemployment numbers is the second release of the day. It is expected to show that 290,000 new claims for unemployment benefits were filed last week, up significantly from the previous week’s 265,000 initial claims. Rising initial claims indicates employment sector weakness, so the higher the number the better the news it is for bonds and mortgage rates. Although it is worth noting that because this is only a weekly snapshot, it usually does not cause much movement in mortgage pricing unless it shows a large variance from forecasts.