Thursday’s bond market has opened in negative territory as market participants prepare for tomorrow major economic release. The stock markets are showing relatively minor gains of 45 points in the Dow and 6 points in the Nasdaq. The bond market is currently down 4/32 (2.24%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
We are seeing some weakness in bonds despite favorable results from both of this morning’s 8:30 AM economic reports. Last week’s unemployment figures showed that new filings jumped to 276,000 from the previous week’s revised total of 260,000. Because rising claims is an indicator of a softening employment sector, we should consider this data good news for mortgage rates. Unfortunately, it is only a weekly report and the markets are more focused on tomorrow’s monthly data.
The second report of the morning was the 3rd Quarter Productivity reading that showed a surprise 1.6% increase when analysts were expecting to see a slight decline. The increase is actually good news for bonds and mortgage pricing because higher levels of productivity allow economic growth without fear if rapid inflation. Still, this report is considered to be of low importance to the markets. Therefore, its impact on today’s trading has been minimal.
Tomorrow closes the week with the release of the almighty monthly Employment report. The Labor Department will post October’s employment stats at 8:30 AM ET tomorrow morning. The report is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of new jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate, holding at 5.1%, an increase in payrolls of approximately 181,000 and a 0.2% increase in average earnings. Weaker than expected readings should renew concerns about the labor market and rally bonds enough to improve mortgage rates, especially if the stock markets react poorly to the news. This is a key report that often causes a great deal of volatility in the financial and mortgage markets.