Wednesday’s bond market has opened well in negative territory following stronger than expected employment-related news and an early rebound in stocks. The major stock indexes are showing sizable gains with the Dow up 115 points and the Nasdaq up 28 points. The bond market is currently down 14/32 (1.98%), which push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point from yesterday’s afternoon rates. In other words, back close to yesterday’s early pricing before the markets went crazy.
Besides this morning’s bond selling erasing a good part of yesterday’s intra-day improvement in mortgage rates, it also takes the 10-year Treasury Note yield right back to a key level of resistance (2.00%). We need to see this hold, meaning we close today below that level or it then resumes its place as a floor rather than a ceiling. That would mean yields and mortgage rates are more likely to move higher than lower in the immediate future because 2.00% is the low end of the range.
Today’s only relevant economic data was the ADP Employment report at 8:15 AM ET. It showed that 241,000 new private-sector jobs were gained last month, exceeding forecasts of 232,000 by a moderate margin. That indicates a slightly stronger than thought employment sector and raises optimism about this Friday’s key monthly Employment report. The higher than expected number makes the news negative for the bond and mortgage markets, but I don’t believe that this news is the main reason for this morning’s bond selling. Today’s losses are more a result of profit-taking from the recent surge, early stock gains and technical issues than caused by this data.
Later today we will get to see the minutes from the last FOMC meeting. They will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so they won’t affect the markets or mortgage rates until afternoon hours. I don’t suspect this particular set of minutes will cause too much concern or excitement because the last FOMC meeting was followed by revised Fed forecasts and a press conference by Chairperson Yellen. Still, analysts will be looking for any tidbits that could help predict when the first short-term interest rate increase will be made.
Tomorrow’s only release worth watching is last week’s unemployment figures at 8:30 AM ET. It is expected to show that 290,000 new claims for unemployment benefits were filed last week, down from 298,000 of the previous week. The higher the number of claims, the better the news it is for bonds and mortgage rates because rising initial claims is a sign of a weakening employment sector. Although, market traders and analysts will be preparing for Friday’s big report rather than worrying too much about a weekly snapshot. So, unless we see a significant variance from forecasts, I don’t think tomorrow’s report will influence mortgage rates much.