Thursday’s bond market has opened in negative territory, erasing yesterday’s afternoon rally. The stock markets are showing gains with the Dow up 52 points and the Nasdaq up 22 points. The bond market is currently down 15/32 (2.45%), but due to strength late yesterday we will likely see little change in this morning’s mortgage rates if comparing to yesterday’s morning levels.
Generally speaking, this morning’s economic data gave us mixed results. The ADP Employment report showed an increase of 204,000 private sector jobs last month, falling a little short of the 220,000 that was expected. That makes the data slightly favorable for the bond and mortgage markets while the weekly unemployment release was neutral. It revealed that 302,000 new claims for unemployment benefits were filed last week, nearly matching forecasts and indicating little movement in the employment sector last week.
Also posted early this morning was the revised 2nd Quarter Productivity numbers. It came in with a lower than expected 2.3% annual rate of productivity that was a little softer than the initial estimate of 2.5%. A secondary reading that tracks labor costs was weaker than forecasts, countering the weaker than thought productivity number. Since this is also only a moderately important report with minor variances, it has not had much of an impact on today’s trading or rates.
Tomorrow brings us the release of the almighty monthly Employment report. This is the biggest news of the week and arguably the most important that we see each month. The Labor Department will post the unemployment rate, number of new jobs added or lost and average hourly earnings for August at 8:30 AM ET tomorrow. The ideal scenario for the bond market and mortgage rates is rising unemployment, a drop in payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate slipped 0.1% to 6.1% and that 223,000 new jobs were added during the month. Weaker than expected readings would signal softer employment sector growth than predicted and would be very good news for bonds and mortgage rates tomorrow. However, if we get noticeably stronger than expected numbers, mortgage rates and bond yields will probably spike higher as stocks rally.