Today's Commentary

Updated on February 7, 2025 10:07:32 AM EST
Friday’s bond market has opened well in negative territory following the release of concerning employment data. Stocks are reacting negatively also with the Dow down 68 points and the Nasdaq down 164 points. The bond market is currently down 16/32 (4.50%), which should push this morning’s mortgage rates higher by approximately .250 of a discount point. If you saw an intraday improvement yesterday, you likely will see a larger increase this morning than those who did not get a change Thursday afternoon.

Today’s major economic news came from January’s governmental Employment report at 8:30 AM ET. It gave us contradicting signs of strength in the employment sector. The first headline of the report was the unemployment rate that dropped from 4.1% in December to 4.0% last month. This was the lowest rate since May of last year. Another piece of bad news came in the average hourly earnings that rose 0.5% when they were expected to rise 0.3%. Rising wages contribute to inflation on a broader scale, meaning it is bad news for bonds and mortgage rates.

The one headline that appeared to be favorable for rates was the payroll number of 143,000 that fell short of the predicted 170,000. Unfortunately, an upward revision of 51,000 to December’s payrolls more than makes up the difference between January’s expected and actual number of new jobs. That revision is offsetting any positive impact January’s number would have had on this morning’s trading.

In short, there isn’t too much in the report that we can consider favorable for bonds and mortgage rates. Not only are January’s numbers bad news for bonds, they also show resilience in the employment sector that is going to make it more difficult for the Fed to lower key short-term rates in the immediate future. With the employment sector holding its own, rate cuts could be counterproductive to the Fed’s longer-term goals. Ideally, weakening employment and declining inflation would allow the Fed to lower borrowing costs for businesses and consumers. The stall of the downward trend in inflation and a strong employment sector is likely going to keep borrowing costs higher for a longer period of time than previously thought.

The University of Michigan gave us today’s second piece of data with the release of their Index of Consumer Sentiment at 10:00 AM ET. They announced a reading of 68.8 that came in well below expectations of 71.3. The decline from January’s 71.1 means surveyed consumers are much less optimistic about their own financial situations this month than they were last month. Because waning confidence usually translates to softer consumer levels, this report was good news for bonds and mortgage rates. The bad news is the employment data carries a significantly higher level of importance than the sentiment data, causing the negative open in bond trading.

Next week has plenty scheduled that we will be watching with Monday being the only day without something significant scheduled. There are two days of Fed Chairman Powell speaking to congressional committees on the status of the economy and monetary policy. Scheduled economic releases include two highly important monthly inflation readings and a closely watched report on consumer spending. In addition to those events and some less important economic data, there are also a couple of Treasury auctions that could affect bond trading and mortgage pricing during afternoon trading two days. Look for details on all of next week’s activities 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... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

 ©Mortgage Commentary 2025
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