Friday’s bond market has opened has opened down sharply following much stronger than expected employment figures. The stock markets are actually reacting negatively to the news also with the Dow down 74 points and the Nasdaq down 4 points. The bond market is currently down 31/32 (2.22%), which should push this morning’s mortgage rates higher by approximately .250 – .375 of a discount point.
February’s Employment report caused this morning’s selling in both bonds and stocks as it revealed the unemployment rate fell 0.2% to 5.5% last month (lowest level since May 2008) while 295,000 new jobs were added to the economy. Analysts were expecting to see a 5.6% unemployment rate and 240,000 new jobs, indicating that the employment sector was much stronger last month than many had thought. In a bit of good news though, the average hourly earnings reading rose only 0.1%, falling short of the 0.2% that was expected.
Today’s report is clearly negative news for the bond and mortgage markets because it shows decent growth in the employment sector. That should have been good news for stocks, however, the strong data now has some analysts thinking the Fed is likely to start raising rates in June rather than later in the year. Raising rates is intended to help control inflation but it also is expected to slow economic growth. Since stocks usually fair better in stronger economic conditions, traders are treating the news as a negative this morning even though the longer-term outlook would be favorable. That may be helping to prevent further losses in bonds as gains in stocks could have drawn more funds away from bonds.
Next week brings us the release of only a couple of relevant economic reports for the markets to digest, but most of what is being posted is highly relevant to the financial and mortgage markets. In addition to that data, there are also two Treasury auctions that often affect the broader bond market and mortgage pricing. None of the relevant events are set for Monday. In fact, we don’t have anything scheduled that needs to be watched until Wednesday afternoon. Look for details on next week’s calendar in Sunday evening’s weekly preview.