Thursday, July 2, 2009

Rate Watch 7/2/2009

Mortgage Bonds are up this morning after grim employment news was released. According to the Labor Department, 467,000 jobs were lost in June, in addition, the unemployment rate rose to 9.5%, its highest level since August 1983. Overall, the weak Job numbers indicate that the recession continues at concerning levels.
The European Central Bank held its benchmark interest steady at 1% to help stimulate the European economy. As a result, the US Dollar has strengthened significantly, which has caused a sharp decline in Oil prices today. The decline in Oil, in turn, is applying pressure to Stocks by pushing shares of energy lower.Currently, the weak job news has helped Mortgage Bonds climb to test a dual layer of resistance. I recommend floating for now, but be prepared to lock in the gains if Bonds are pushed lower. Remember, the markets will be closed tomorrow in observance of Independence Day. Have a safe and happy holiday
Leonard Winslow Dominion Trust Mortgage
434-760-2580 (cell)
leonad.winslow@dominiontrustmortgage.com
www.dominiontrustmortgage.com/leonard.winslow
Posted by Rob Alley at 8:49 AM
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1 comments:

Rob Alley said...

Thursday's bond market has opened in positive territory following a weak opening on stocks. The stock markets are posting sizable losses with the Dow down 174 points and the Nasdaq 43 points. The bond market is currently up 9/32, which, with yesterday's late strength, should improve this morning's mortgage rates by approximately .375 of a discount point compared to yesterday's morning rates.

This morning's economic data gave us mixed results, beginning when the Labor Department reported that the U.S. unemployment rose 0.1% last month to stand at 9.5%. This was slightly lower than the 9.6% that many analysts and market traders had expected and can be considered negative for bonds because it fell short of forecasts.

However, the other two headline numbers from this report gave us favorable results and are making the biggest impact on bond trading this morning. The report showed that 467,000 jobs were lost during the month, ex ceeding forecasts of approximately 365,000. In addition, the reading that gives average hourly earnings showed no change from May's level. This means that earnings did not rise when they were expected to move higher 0.1%. While the earnings data may not be good for workers, it shows that wage inflation is little threat at this time.

Overall, the Employment report was favorable for bonds with the larger than expected decline in jobs taking center stage. The unemployment rate was somewhat of a disappointment, but it was still an increase from May's rate. The average hourly earnings reading is the least important of the three but still gave us favorable results. The Factory Orders report was not favorable to bonds or mortgage rates, but it also has nowhere near the level of importance as the monthly Employment report. Therefore, today's data can be considered good news for bonds and mortgage rates.

The financial markets will be closed tomorrow in observance of the Independence Day holiday and will reopen Monday morning. There will not be an early close in the bond market today, but I suspect that trading will be thin during afternoon hours as market participants head home for the holiday weekend. This means we should see a fairly quiet afternoon in bonds and mortgage pricing as long as no unexpected news surprises the markets.

http://www.robsellscharlottesville.com

July 2, 2009 at 9:31 AM

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