Tuesday’s bond market has opened in positive territory with stocks definitely in selling mode. The Dow is currently down 176 points while the Nasdaq is down 55 points. The bond market is currently up 21/32 (1.80%), which should improve this morning’s mortgage rates by approximately .125 of a discount point. Preventing a better improvement is weakness from late yesterday that caused some lenders to revise rates higher.
There was nothing released here this morning that was relevant to mortgage rates. Tomorrow though brings us the release of three reports that are worth looking at. The first is the ADP Employment report for April at 8:15 AM ET. This release has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. It tracks changes in private-sector jobs of ADP’s clients that use them for payroll processing. While it does draw attention, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that usually follows a couple days later. Still, because we do often see a reaction to the report, we should be watching it. Analysts are expecting it to show that 196,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
The second report of the day will come from the Labor Department, who will release its 1st Quarter Productivity and Costs data at 8:30 AM ET. This information helps us measure employee productivity in the workplace. High levels of productivity help allow low-inflationary economic growth. If employee productivity is rapidly rising, the bond market should react favorably. Tomorrow’s release is expected to show a 1.4% decline in worker productivity during the first three months of the year. A larger decline could cause bond prices to drop and mortgage rates to rise slightly tomorrow morning.
Tomorrow’s final report will be February’s Factory Orders at 10:00 AM ET. This data is similar to the Durable Goods Orders report that was posted last week, except it includes orders for both durable and non-durable goods. It will give us another measurement of manufacturing sector strength. It is considered to be only moderately important to the bond and mortgage markets, so unless it varies greatly from forecasts of a 0.5% increase, I suspect that the data will have a minimal impact on tomorrow’s mortgage rates.