Thursday’s bond market has opened in negative territory again as traders prepare for tomorrow’s major news. The stock markets are mixed with the Dow up 12 points and the Nasdaq down 2 points. The bond market is currently down 3/32 (2.35%), which should keep this morning’s mortgage rates close to yesterday’s levels.
Neither of this morning’s two minor economic reports drew much attention. The first showed that 278,000 new claims for unemployment benefits were filed last week. This was down from the previous week’s revised total of 288,000 initial claims, indicating that the employment sector strengthened last week. That makes the data negative for bonds and mortgage rates but because this is only a weekly snapshot if the sector, it has had a minimal impact on this morning’s trading.
Also posted early this morning was the 3rd Quarter Productivity reading that revealed a 2.0% annual rate of productivity gains. That is stronger than analysts were expecting to see, so we can considered the news to be slightly favorable for mortgage rates
Tomorrow morning brings us 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 5.9%, an increase in payrolls of approximately 237,000 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 noticeably, especially if the stock markets react poorly to the news. On the other hand, stronger than predicted numbers will likely fuel bond selling and a sizable upward revision to mortgage rates.
Fed Chair Janet Yellen is set to speak at 10:15 AM ET at a central bank conference in Paris tomorrow. She will be with a group of foreign central bank figures, so market participants will be watching for any interesting tidbits about global economic conditions and potential monetary policy moves from the panel of central bankers. This type of event can bring a heavy market reaction or be a complete non-factor in tomorrow’s trading. The morning tone will be set by the Employment report and then there may or may not be another move as a result of this speaking engagement.