Thursday’s bond market has opened in negative territory as some investors sell holdings to record profits from yesterday’s rally. The stock markets are showing losses with the Dow down 60 points and the Nasdaq down 27 points. The bond market is currently down 7/32 (2.41), but due to strength late yesterday, we should still see a small improvement in rates if comparing to Wednesday’s morning pricing.
Today’s economic releases gave us mixed results, but since neither is considered highly important they have had a minimal impact on today’s rates. The first was the weekly unemployment update at 8:30 AM ET that showed 287,000 new claims for unemployment benefits were made last week. This was short of the 297,000 initial claims that was expected and a decline from the previous week’s revised total of 295,000. In other words, the data indicates the employment sector was slightly stronger last week than many had thought, making the news negative for bonds and mortgage rates.
Late this morning, the Commerce Department posted August’s Factory Orders report. It revealed a 10.1% drop in new orders for durable and non-durable products. That was a larger decline than forecasts were calling for and points towards a slowing manufacturing sector. Normally that would be very good news, but the data is skewed due to a large spike in airplane orders in July. Therefore, we can consider the data neutral to slightly positive for rates.
Tomorrow brings us the release of the almighty monthly Employment report at 8:30 AM ET. This Labor Department report will give the U.S. unemployment rate, number of new payrolls added or lost during the month and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.
If this report gives us weaker than expected readings, bond prices should move higher and we should see lower mortgage rates tomorrow. However, stronger than forecasted readings could cause a sizable spike in mortgage pricing and start another upward trend in rates. Analysts are expecting to see the unemployment rate remain at 6.1%, an increase of 210,000 new jobs from August’s level and a 0.2% increase in earnings.