March 5th, 2010 9:07 AM by Lehel S.
Friday's bond market opened well in negative territory following the release of stronger than expected employment data. The stock markets are reacting positively to the news with the Dow up 71 points and the Nasdaq up 16 points. The bond market is currently down 19/32, but due to strength in bonds late yesterday, this morning's increase in mortgage rates should be kept to approximately .125 - .250 of a discount point when compared to yesterday's morning pricing.
The Labor Department gave us this morning's key report. It showed that the U.S. unemployment rate remained at 9.7% last month when forecasts had called for a 0.1% increase. The number of jobs lost in the month came in at 36,000 when analysts were expecting a loss of 65,000 jobs. Both of these readings were negative for bonds and mortgage rates and positive for the stock markets since it paints less of a grim picture in the labor market as thought.
A bit of good news for the bond marke t came in the average hourly earnings reading that rose 0.1%. It was expected to show an increase of 0.2%, meaning income costs did not rise as much as thought. This is an indicator of wage inflation, so the lower the increase, the better for bonds. However, this reading is taking a backseat to the two headline figures of 9.7% and 36,000.
Today's data didn't do anything to change my cautious approach towards mortgage rates. There is some concern that the severe weather during February could have skewed the employment numbers. Unfortunately, nobody knows for sure or by how much. Therefore, we are seeing a negative reaction today and that tone will likely continue in the bond market until we see data that contradicts today's news. So, I would continue to proceed extremely cautiously if still floating an interest rate.
Next week is fairly light in terms of economic releases, but it does bring us one very important report. There are also two relevan t Treasury auctions on the calendar, but none of the events that are likely to affect mortgage rates are scheduled for release Monday or Tuesday. Look for more details on next week's events in Sunday's weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.