Mel's Blog

Friday's bond market has opened down sharply again following mixed results in today's Employment report. The stock markets are mixed with the Dow up 13 points but the Nasdaq down 1 point. The bond market is currently down 84 basis points, fixed rates are approaching 6%.

The Labor Department released May's employment figures this morning, showing a higher than expected unemployment rate of 9.4% but a decline in payrolls of 345,000 that was smaller than expected. Analysts had forecasted a 9.2% unemployment rate and a drop in jobs of approximately 520,000. The 9.4% rate of unemployment is a 26-year high, but the job loss number was the smallest decline since September.

It appears that the job loss number is having the biggest influence on trading this morning. The smaller figure indicates that job cuts may be slowing, which is important for the economy to start to pull out of the recession. It fuels the theory that the economy may begin to recover later this year. This is bad news for bonds and mortgage rates because a slowing economy usually makes long-term securities such as mortgage-related bonds more attractive to investors. This news, coupled with concern about the next debt offering from the Fed has fueled another morning of bond selling.

This has not been a pleasant week for mortgage shoppers with rates ending the week much higher than it began. Next week is moderately important in terms of economic reports. There are a couple reports worth noting but they don't start until the middle of the week. There is no relevant data scheduled for release Monday, so there is little news to help change the current momentum in bonds.

                   Mel