Friday’s bond market has opened in positive territory following the release of this morning’s key economic data. The stock markets are not responding positively to the data, pushing the Dow lower by 35 points and the Nasdaq down 21 points. The bond market is currently up 15/32 (2.32%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.
Today’s only economic data was October’s Employment report. The Labor Department announced that the U.S. unemployment rate slipped 0.1% to 5.8% last month while 214,000 new jobs were added. The unemployment dip isn’t favorable news for bonds but the weaker than expected payroll number (237,000 was predicted) is good news. The payroll figure usually draws more attention, so it is the catalyst for this morning’s bond gains. The 214,000 jobs is respectable, however analysts and traders wanted to see more. Even the average hourly earnings came in a little softer than forecasts (+0.1% vs +0.2%). Therefore, we can consider the report mostly positive for bonds and mortgage rates because it points towards an employment sector that was not growing as quickly as many had thought.
This morning’s speaking engagement by Fed Chair Janet Yellen in Paris has failed to gives us any surprises. Other Fed members speaking this morning did include bond-friendly comments about inflation, particularly that there is little possibility of it exceeding the Fed’s target rate. That is good news for bonds because inflation erodes the value of a long-term security’s future fixed interest payments. Bonds usually tend to thrive in weaker economic conditions with low inflationary pressures. Accordingly, the comments were taken as a positive for bonds and helped them extend this morning’s early gains, to the benefit of mortgage shoppers.
Next week is a holiday-shortened week for the bond market with only a couple of relevant economic reports scheduled for release in addition to two Treasury auctions. One of the reports is considered extremely important but all of the mortgage-relevant events are set for the latter days. Nothing of importance is expected to be posted Monday. Look for details on all of next week’s activities in Sunday evening’s weekly preview.