Friday’s bond market has opened in positive territory following the release of this morning’s key economic data. The stock markets are also reacting favorably to the news with the Dow up 248 points and the Nasdaq up 58 points. The bond market is currently up 19/32 (2.11%), which with yesterday’s afternoon strength (yes- strength, not weakness) should improve this morning’s mortgage rates by approximately .375 of a discount point if comparing to Thursday’s early rates.
The Labor Department released April’s Employment report at 8:30 AM ET this morning, giving us some highly important employment sector readings. It showed that the unemployment rate slipped from 5.5% on March to 5.4% last month, as expected. The second headline number that everyone watches was the 223,000 new jobs added during the month that slightly exceeded forecasts of 218,000. The third reading was the 0.1% increase in average hourly earnings, falling short of the 0.2% that was predicted.
The unemployment rate pegged forecasts and the payroll number wasn’t enough of a variance to cause alarm. The earnings reading is actually pretty good news for bonds and mortgage rates because it showed weaker wage growth. So why the positive reaction in bonds and mortgage pricing this morning? For the most part we can attribute it to two things. The first is a sizable downward revision to March’s already weaker than thought payroll number (126,000 to 85,000). The other reason is simply relief that the report did not show stronger numbers that would have affected the timeline of the Fed’s first rate hike. Apparently, many traders were expecting to see numbers that exceeded forecasts. Both causes should have only a temporary impact on bonds and mortgage rates though.
Next week has several reports scheduled for release that may affect mortgage rates, but they are all set for the latter days. A couple of them are considered to be highly important to the financial and mortgage markets. In addition to the data there will also be two Treasury auctions that are known to influence mortgage pricing. None of the events will take place Monday. Look for details on next week’s calendar in Sunday evening’s weekly preview.