September 4th, 2009 12:51 PM by Lehel Szucs
Friday's bond market has opened in negative territory after today's major employment news did not reveal significantly weaker than expected readings. The stock markets have reacted mildly to the news though with the Dow up just 30 points and the Nasdaq up 8 points. The bond market is currently down 12/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point over yesterday's morning rates.
The Labor Department reported this morning that the unemployment rate moved from 9.4% in July to 9.7% last month. This was higher than the 9.5% rate that was expected, which can be considered good news for bonds and mortgage rates. However, only 216,000 jobs were lost during the month when analysts were expecting to see a slightly larger decline. A revision to July's job loss number showed that 276,000 jobs were lost compared to the 247,000 announced last month. But this worked against bonds today because the 216,000 now shows a larger improvement from July to August than what was predicted.
Also hurting bonds this morning is the average hourly earnings reading in the report that revealed a 0.3% rise in earnings. This was much higher than the 0.1% that was expected, meaning earnings rose more than many had thought. That is bad news for bonds because rising wages raises wage inflation fears than can lead to broader inflation spikes within the economy.
As expected, it was going to take a much weaker than forecasted employment report for the bond market to improve. This could lead to further selling in bonds and possible upward revisions to mortgage rates as the day progresses. I would not be surprised at all to see an upward revision to rates sometime this afternoon.
The financial markets will be closed Monday in observance of the Labor Day holiday. However, there will not be an early close in the bond market today although many traders may be heading ho me early for the long weekend. This may also fuel more selling in bonds as those traders look to protect themselves over the holiday weekend.
Next week is fairly light in terms of economic reports scheduled for release. As mentioned, the markets will be closed Monday as will most mortgage lenders. There is no relevant economic data scheduled for release until Wednesday next week. 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... 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