June 5th, 2009 5:55 PM by Lehel Szucs
Thursday's bond market has opened down sharply as investors prepare for tomorrow's economic data and upcoming debt sales. The stock markets are showing minor gains with the Dow up 26 points and the Nasdaq up 9 points. The bond market is currently down 30/32, which will likely push this morning's mortgage rates higher by approximately .250 - .375 of a discount point.
This morning's release of revised figures on 1st Quarter Productivity and Costs showed a larger than expected increase of a 1.6% gain. Analysts were expecting to see a 1.2% increase, meaning workers were more productive in the quarter than previously thought. However, the costs reading revealed a slight upward revision that is considered bad news for bonds and rates. But the bottom line is that this data failed to influence bond trading or mortgage rates this morning.
The Labor Department reported that 621,000 new claims for benefits were filed last week. This was very close to for ecasts and has had little impact on today's rates. The biggest influence on trading today is concern about the amount of debt the Fed is going to announce that is coming to sale in the immediate future.
Tomorrow's sole report is arguably the single most important report that we see each month. The Labor Department will post May's Employment data during early trading. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate climb to 9.2% with approximately 520,000 jobs lost during the month.
A higher than expected increase in the unemployment rate and a larger drop in payrolls would be great news for the bond market. It would probably create a sizable rally in bonds, leading to lower mortgage rates tomorrow. However, if we see stronger than expected numbers, it could lead to a spike in mortgage rates tomorrow.
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... Float 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.
©Mortgage Commentary 2009