Thursday, September 3rd
Thursday’s bond market has opened in positive territory despite mixed economic news and early stock strength. The Dow is up 283 points while the Nasdaq has gained 177 points. The bond market is currently up 7/32 (4.75%), which should be enough to improve this morning’s mortgage rates by approximately .250 of a discount point.
7/32
Bonds
30 yr - 4.75%
283
Dow
53,345
177
NASDAQ
26,395
Trailing 90 Days - National Average
Medium
Neutral
Yesterday afternoon’s release of the Fed Beige Book showed no major surprises. Business contacts in 10 of the Fed’s 12 regions reported slight to moderate economic growth with the others saying activity was unchanged during the early July to mid-August period. Consumer spending and manufacturing activity increased slightly across most districts while employment remained stable. However, there is still notable concern about geopolitical events and elevated prices, particularly energy costs, despite keeping a generally positive outlook towards future activity. There was a bit of volatility in bonds late yesterday but it wasn’t due to this report.
Medium
Neutral
Last week’s unemployment figures were posted at 8:30 AM ET, revealing 206,000 new claims for jobless benefits were filed last week. This was a small increase from the previous week’s revised 204,000 initial filings, but in line with expectations. Analysts were expecting to see an increase of 2,000 new claims, so the upward revision to the previous week’s number keeps last week’s initial filings with forecasts. Therefore, we are labeling the data as neutral to slightly favorable for bonds and mortgage rates.
Medium
Positive
Also posted early this morning were revised 2nd Quarter Productivity numbers. The first headline reading showed there was no change to the initial estimate of worker productivity growing at a 1.4% annual pace, which is relevant because higher levels of productivity allow for the economy to grow without inflationary pressures. A secondary reading that tracks labor costs was revised slightly lower from last month’s preliminary reading. The revision from a 1.3% rate to 1.2% is minor, but is enough for us to consider the report slightly favorable for rates.
Medium
Negative
The Institute for Supply Management (ISM) gave us this morning’s third economic release. They announced at 10:00 AM ET that their non-manufacturing index (aka service index) stood at 55.4 last month. This was higher than the 54.4 that was expected and an increase from July’s 54.1. The increase means more surveyed service sector executives felt business improved last month than did in July. As a sign of economic strength that makes bonds less appealing to investors, the report is unfavorable for mortgage rates.
High
Unknown
This week’s calendar comes to a close with the release of the almighty monthly Employment report at 8:30 AM ET tomorrow. It will give us details on the employment sector during August, including the U.S. unemployment rate, number of new jobs added or lost and average hourly earnings for the month. The ideal scenario for the bond market and mortgage rates would be an increase in the unemployment rate, a decline in payrolls and earnings to fall slightly. Analysts are expecting to see that the unemployment rate inched up from July's 4.1% to 4.2% and that 56,000 jobs were added during the month. The average earnings reading is forecasted to have risen 0.3% from July. Weaker than expected readings would be very good news for the bond market and mortgage rates. A stronger than predicted employment sector would make it easier for the Fed to raise key short-term interest rates at an upcoming FOMC meeting and would likely lead to a noticeable increase 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... 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.