Thursday's bond market has opened slightly in positive territory again following the release of weaker than expected manufacturing data. The stock markets are nearly flat with the Dow up 4 points and the Nasdaq up 3 points. The bond market is currently up 5/32, but we will likely still see a slight increase in this morning's mortgage rates due to weakness in bonds late yesterday.
The Commerce Department said late this morning that new orders at U.S. factories fell 3.3% last month. This was a larger drop than was expected and indicates that the manufacturing sector is weaker than many had thought. This is good news for binds and mortgage rates because slowing economic activity eases inflation concerns and makes long-term investments such as mortgage-related bonds more attractive to investors.
Earlier this morning, the Labor Department said that 317,000 new claims for unemployment benefits were filed last week. This was higher than expected, which also can be considered positive news for bonds. However, because it tracks only a week's worth of claims, traders generally don't pay too much attention to its results. This week is especially true with the monthly report coming tomorrow morning.
The Labor Department will also post September's Employment report early tomorrow morning. This report will reveal the U.S. unemployment rate, number of new payrolls added and average hourly earnings. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, falling payrolls and a drop in earnings.
If we see weaker than expected readings, I expect bond prices to rise and mortgage rates to drop tomorrow morning. But, if the release shows stronger than forecasted readings, particularly in the number of new jobs and average earnings reading, mortgage rates may spike sharply higher tomorrow.
Analysts are expecting to see a slight increase in the unemployment rate to bring it to 4.7%, an increase in new payrolls of approximately 100,000 and a 0.3% increase in earnings. I am concerned that the jobs number may rebound after last month's surprise decline. Accordingly, I am going into the report cautiously and holding lock recommendations for immediate and short-term periods.
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.
*Information can be found on my website: http://www.family-home-loans.net/DailyRateLockAdvisory
*Information Supplied by a la mode, inc.
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