Thursday’s bond market has opened in positive territory despite stronger than expected economic data. The major stock indexes are relatively calm with the Dow up 11 points and the Nasdaq up 9 points. The bond market is currently up 13/32 (2.20%), but the improvement to this morning’s mortgage rates will be limited due to another round of afternoon weakness yesterday. If your lender revised rates upward late yesterday, you should see more of an improvement in this morning’s rates than those who did not revise pricing Wednesday afternoon.
Last week’s unemployment figures were posted early this morning, revealing that 265,000 new claims for unemployment benefits were filed last week. This was a small increase from the previous week’s 262,000 initial claims but well short of the 280,000 that was expected. That means that the employment sector was a bit stronger last week than many had thought, making the data bad news for bonds and mortgage rates. Fortunately, this is only a weekly report and has had a minimal impact on this morning’s pricing.
Tomorrow brings us the release of the almighty monthly Employment report. The Labor Department posts this data and will give us April’s Employment numbers. This is an extremely important report to the financial and mortgage markets. Some of the key readings that will be posted are the U.S. unemployment rate and the number of jobs added or lost during the month. It is expected to show that the unemployment rate slipped from 5.5% to 5.4% and that approximately 218,000 payrolls were added to the economy during the month. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and would likely push mortgage rates lower tomorrow morning because it would indicate weaker than thought conditions in the employment sector of the economy. However, stronger than expected results would probably fuel a stock rally and bond selling that leads to a sizable increase in mortgage pricing.
I believe tomorrow is going to be a pivotal day for the bond and mortgage markets. Probably more than it is for the stock markets. With the benchmark 10-year Treasury Note yield now well above its recent trading range, there is much to be concerned about and also a great deal of potential gain. An extremely weak report tomorrow could easily start a downward move in yields that brings the 10-year back towards and maybe even below 2.00%. Since mortgage rates tend to follow bond yields, this would be great news for mortgage shoppers. However, a strong Employment report makes 2.35% a realistic possibility, equating to another round of increases in mortgage pricing. Tomorrow’s report will be key in determining mortgage rate direction over the next several weeks, so please proceed cautiously if still floating an interest rate and closing in the near future.