Sample Commentary Report




Friday’s bond market has opened well in positive territory following weaker than expected employment news. Stocks are also rallying as the data has analysts predicting a change in the Fed’s game plan with monetary policy. The Dow is currently up 222 points while the Nasdaq is up 82 points. The bond market is currently up 16/32 (2.06%), which should improve this morning’s mortgage rates by approximately .125 of a discount point compared to Thursday’s early pricing. The benchmark 10-year Treasury Note yield is now at its lowest level since early September 2017.

Today’s big news was May’s Employment report that showed weaker than expected numbers in a couple of the headline readings. Under the uneventful category, the unemployment rate held at 3.6% when it was expected to rise to 3.7%. Theoretically, this is bad news for mortgage rates because rising unemployment is a sign of economic weakness. However, not much attention is paid to this index anymore unless it shows a big move. Much more focus is on the other headline numbers.

The really good news came in the payroll number and average earnings change. Today’s report revealed that only 75,000 new jobs were added to the economy last month, falling well short of the 180,000 that was expected. In addition, the report also revealed downward revisions to April and May’s payroll numbers that took away 75,000 previously announced jobs. Those revisions put the year to date monthly average at 164,000 new jobs per month, down from last year’s 223,000 monthly average. It is apparent that the employment sector is slowing, which is good news for the bond and mortgage markets.

Also under the good news column was the 0.2% average hourly earnings. May’s rise was weaker than the 0.3% that was expected and dropped the annual increase rate from 3.2% to 3.1%. Wage inflation is watched closely as it often spreads to other part of the economy, making bonds less attractive to investors. Increases also means consumers have more money to spend, fueling economic growth. Accordingly, the weaker than expected increase is favorable news to bond traders and mortgage pricing.

Overall, today’s report was very good news for bonds and mortgage rates. It confirms that the employment sector is softening, which supports the bigger picture theory that the overall economy is headed for slower growth, or worse. It also supports recent predictions that the Fed will need to cut key short-term rates at least once before the end of the year instead of making increases that were expected when the new year started.

Next week brings us the release of only a few relevant economic reports, but most of which is being posted is considered to be highly important. We will get a couple of inflation readings from the Consumer and Producer Price Indexes along with May’s Retail Sales report. None of the week’s releases are set for Monday, so we can expect weekend news to drive trading as the new week starts. Of particular interest will be Monday’s deadline for the Mexico trade tariff to go into effect. Look for details on all of next week’s mortgage rate-relevant events in Sunday evening’s weekly preview.

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…








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