Thursday, February 2, 2017 - Article by: James Brooks -
By James Brooks
The bond market is up 8/32 (2.45%), which should improve today's mortgage rates by approximately .125 of a discount point.
There were two pieces of data posted at 8:30 AM ET this morning. Neither were considered important to the financial or mortgage markets. The first was last week's unemployment update that showed 246,000 new claims for unemployment benefits were filed. This was a little lower than the 250,000 that was expected and a decline from the previous week's revised 260,000 initial filings. Declining claims is a sign of a strengthening employment sector, so we should consider this data negative for mortgage rates. However, it is only a weekly snapshot and the variance from forecasts was not significant. Therefore, it has had a minimal impact on today's mortgage rates.
Also posted early this morning was 4th Quarter Employee Productivity and Costs data. It revealed that worker productivity grew at an annual rate of 1.3% last quarter, exceeding expectations of 1.0%. In this report, the higher the growth rate the better the news it is for bonds. This means we can consider the data favorable for mortgage rates. Although, it is not the cause of today's bond strength.
Tomorrow brings us the almighty monthly Employment report from the Labor Department at 8:30 AM ET. This is a key report that can heavily influence the financial and mortgage markets. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller rise in payrolls than expected and flat earnings. Current forecasts are calling for no change in the unemployment rate of 4.7% and approximately 180,000 new jobs added to the economy.
I am paying close attention to the average hourly earnings reading also as it is trending upward. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the strength of economy and the Fed raising rates, which would likely lead to a sizable improvement in mortgage pricing.
December's Factory Orders data is also scheduled to be released tomorrow morning but at 10:00 AM ET. It is similar to last week's Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is not one of the more important reports we get each month, however, it can normally influence mortgage pricing if it varies greatly from forecasts. Analysts are expecting a 1.4% rise in new orders, indicating a strengthening manufacturing sector. The bond market would like to see a large decline, meaning that manufacturing activity was weaker than many had thought. However, the Employment report will be taking center stage 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.
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