Awaiting Tomorrow’s BLS Report

Mortgage bonds continue to inch higher, slowly moving further from their 200-day moving average.  Stocks have slowly trickled lower the past few days, which has greatly contributed to the improvements we have experienced in the bond market. If this trend continues, we could see interest rates improve even further, as there is little overhead resistance within a short distance of current levels.  This could provide a great opportunity for the remaining late summer home buyers who have yet to nail down a purchase contract. Hopefully tomorrow’s employment report will help and not hurt mortgage interest rates in the near term.

There is great anticipation surrounding tomorrow’s Bureau of Labor Statistics’ (BLS) Jobs Report.  After ADP’s modest report of just 178,000 new job creations, the average polling of economists expects the number to come in well below last month’s figure of 222,000. In fact, current expectations are set at 178,000, which perfectly matched the number reported by ADP.  More importantly, we believe the market will have a stronger reaction to the Average Hourly Earnings report, as that will show the level of wage pressure inflation within the market. If wage growth continues at a slow pace, we could see a more muted reaction to even a stronger than expected Jobs report. However, if wage growth is strong, regardless of the level of job gains, mortgage bond prices will likely suffer.

For those willing to take the risk, you can float into tomorrow’s report. Just understand that there is an elevated level of risk to do so.