Wednesday’s bond market has opened in negative territory despite favorable economic news. The stock markets are causing the pressure in bonds with sizable gains in the major indexes. The Dow is currently up 182 points while the Nasdaq is up 33 points. The bond market is currently down 7/32 (2.18%), but strength late yesterday should keep this morning’s mortgage rates very close to yesterday’s morning levels.
The first of today’s four mortgage-relevant events came at 8:15 AM ET when August’s ADP Employment report was released. It showed 190,000 new private-sector jobs were added last month, falling short of expectations. Forecasts were calling for 203,000 jobs and July’s figure was revised lower by 8,000 jobs. The numbers are technically good news for the bond and mortgage markets. However, as I mention every month, I don’t have a lot of confidence in this report and prefer to wait for the government’s monthly report Friday to gauge employment sector strength or weakness.
At 8:30 AM ET, the 2nd Quarter Productivity revision was posted. It showed a 3.3% annual rate, exceeding forecasts of 2.8%. This was also a sizable upward revision from the preliminary estimate of 1.3%. This means that workers were more productive per hour worked than many had expected. In addition, the Unit Labor Costs reading in the report showed a 1.4% decline after initially being estimated at a 0.5% increase. Both readings are favorable for bonds and mortgage rates. Unfortunately, this is considered to be a minor report and has had little impact on today’s mortgage pricing.
The Commerce Department gave us July’s Factory Orders at 10:00 AM ET, announcing a 0.4% decline in new orders for both durable and non-durable goods. This was well below forecasts of a 0.9% rise in new orders, indicating manufacturing sector weakness. That makes the data good news for mortgage rates also.
We do have an afternoon release that we need to watch today. The Federal Reserve will release its Beige Book report at 2:00 PM ET, detailing current economic conditions in the U.S. by Federal Reserve regions. This is a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises or changes from the previous release, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s likelihood of raising short-term interest rates when they meet September 16 and 17.
Tomorrow’s only semi-relevant data will be last week’s unemployment figures. I don’t see them having much of an impact on the markets or mortgage rates because traders and analysts will be focused on the highly important monthly Employment report that is set for release early Friday morning.