Mortgage Market Update: Rates Pushing Higher
Friday, August 7th, 2009At 8:30 good news for the economy; very bad news for the interest rate markets. The July employment report hit; non-farm job losses were expected to be -330K, they were down just 247K, the unemployment rate was expected to be up 0.2% to 9.7%, it hit at 9.4% down 0.1%. On the initial reaction the rate markets took a serious hit, down 22/32 on the 10 yr with its yield at 3.85%, punching out of its seven week trading range. Mortgage prices at 8:35 were trading down 23/32 (.78 bp). Average hourly earnings were also better, up 0.2%. Revisions in May and June added 43K back on improved data. The NFP jobs data, the best since August 2008; 6.7 mil job losses since the recession began. At 9:00 the 10 yr note -23/32 at 3.85% +10 BP; mortgage prices -17/32 on the session from yesterday’s close.
Payrolls at builders fell 76,000 after decreasing 86,000 in June. Financial firms decreased payrolls by 13,000. Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 119,000 workers after losing 220,000 the month before. Retail payrolls decreased by 44,100. Government payrolls increased by 7,000 after falling 48,000 the prior month.
Consumers are still not likely to increase spending; job losses may be coming down but not many new jobs are on the near term horizon. The outlook for employment, while momentarily looking better based on this morning’s data, remains negative. Tim Geithner and Larry Summers, both key Administration officials, continue to expect the unemployment rate to increase and not flatten until mid- 2010. Nevertheless the data this morning will keep pressure on interest rates and run stock indexes higher through the rest of the day.