Wednesday’s bond market has opened in negative territory despite early stock selling and fairly favorable economic news. The Dow is currently down 78 points while the Nasdaq has lost 19 points. The bond market is currently down 7/32 (2.20%), which with yesterday’s afternoon weakness should push this morning’s mortgage rates higher by approximately .125 of a discount point from yesterday’s morning pricing.
The first of today’s two releases came before the markets opened. April’s ADP Employment report showed that 169,000 new jobs were added to the economy last month. This fell short of the 189,000 that was expected, indicating the private-sector part of the labor market was softer than many had thought, making the data good news for bonds and mortgage rates. It was this news that helped erase overnight and early morning losses in bonds.
Also posted this morning was the 1st Quarter Productivity and Costs data from the Labor Department. It showed a 1.9% decline in worker productivity that matched expectations. A secondary reading that tracks labor costs showed a 5.0% increase compared to forecasts of 4.5%. These readings are actually not so favorable for bonds and mortgage rates, but fortunately the report itself is considered to be of low importance to the markets. Therefore, its impact on today’s trading and mortgage pricing has been minimal.
Tomorrow’s only relevant data is last week’s unemployment figures. They are expected to show that 280,000 new claims for unemployment benefits were made last week, up from the previous week’s 262,000 initial claims. Rising claims indicates a softening employment sector, so the higher the number the better the news it is for mortgage rates. Although, it is worth noting that this is only a weekly update and the monthly Employment report will follow Friday morning, so don’t expect a significant reaction to the data.