November 4th, 2016 10:43 AM by T. Fanning
Last Updated: 11/4/16Friday's bond market has opened in positive territory, reacting to this morning's mixed employment news. The major stock indexes are fairly calm with the Dow down 9 points and the Nasdaq up 2 points. The bond market is currently up 9/32 (1.78%), which should improve this morning's mortgage rates by approximately .125 of a discount point.Today's big news was October's Employment report at 8:30 AM ET. It showed that the U.S. unemployment rate moved lower by 0.1% to 4.9% last month while 161,000 new jobs were added to the economy. The unemployment rate pegged expectations while the payroll number came in lower than the 176,000 that was forecasted. That in itself is good news for bonds. However, the report gave us revisions to September's and August's numbers that added 44,000 jobs to the year-to-date total. While the miss for October can be considered good news, the upward revisions appear to neutralize that news.One point of concern in the data was the 0.4% rise in average earnings. This is a noticeable move and exceeded expectations of a 0.3% increase. Rising wages is an inflationary concern and also means that consumers have more money to spend. As we predicted when earnings spiked back in July, earnings growth is becoming a concern in the bond market. July's 0.4% rise was followed by a more normal 0.1% increase in August. If we don't see the same happen in November's data, this topic will be much more in the spotlight and is going to be a weight on bonds, likely leading to higher mortgage rates.Overall, this morning's report doesn't do anything to alter the general consensus that the Fed will make a monetary policy move at next month's FOMC meeting. I don't believe Tuesday's election results will influence the Fed's decision regardless of who wins. There is no immediate pressing need for the Fed to act right away, but there also is no reason not to either. Therefore, many analysts and market participants believe the Fed will take the opportunity to make a 0.25% increase to key short-term interest rates next month. We will get November's employment numbers before that meeting takes place. Today's release didn't alter that prediction, so unless November's numbers are significantly different, a December rate hike is a pretty safe bet.Next week has very little in terms of economic data scheduled to be posted but does have two Treasury auctions and Election Day to be concerned with. Election Day is Tuesday and the auctions are mid-week. The little data that is being released comes during the latter days and is considered to be only moderately important. Look for details on next week's activities in Sunday evening's weekly preview.If I were considering financing/refinancing a home, I would....Lock if my closing were taking place within 7 days...Lock if my closing were taking place between 8 and 20 days...Float if my closing were taking place between 21 and 60 days...Float if my closing were taking place over 60 days from now...This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.http://www.hlmcolorado.com/DailyRateAdvisory
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