December 3rd, 2009 4:15 PM by Mel Samick
Thursday's bond market has opened in negative territory following the release of unfavorable economic news. The stock markets are down with the Dow down 87 points and the Nasdaq up 12 points. The bond market is currently down 25/32, which will likely push this morning's mortgage rates higher.The 3rd Quarter Productivity revision gave us a lower level of productivity than previously thought and fell short of forecasts. The 8.1% annual rate of worker productivity growth can be considered negative new for bonds because the preliminary estimate stood at 9.5% and forecasts for today's revision were 8.5%. That is still a healthy rate of productivity, but the fact that it fell short of expectations means it is bad news for bonds.The Labor Department also gave us news that was not so good for bonds and mortgage rates. They reported that 457,000 new claims for unemployment benefits were filed last week. This was a lower total than the 480,000 that was expected and their lowest total since September of last year, meaning the employment situation may be stronger than thought. However, this data usually does not carry too much weight because it tracks only a single week's worth of new claims. Tomorrow's monthly report is a different story though.Also worth noting is today's Senate confirmation hearing for Fed Chairman Bernanke. I don't think anything said during today's hearing will significantly affect the markets or mortgage rate. He has stated that the economy is coming out of the recession but that there is still more work to be done. Despite some early barbs in the hearing, there is little doubt that he will be confirmed for another term four-year term.We will here again from the Labor Department tomorrow morning when they post November's Employment report. This is arguably the most important monthly report we se e. It is comprised of many statistics and readings, but the most important ones are the unemployment rate, the number of news jobs added or lost during the month and average hourly earnings. Current forecasts call for no change in the unemployment rate of 10.2%, payrolls down approximately 125,000 and an increase of 0.2% in average earnings. An ideal scenario for mortgage shoppers would be a higher unemployment rate than 10.2%, a larger decline in jobs and no change in the earnings reading. Also scheduled for release tomorrow is the October's Factory Orders report. This data is similar to last week's Durable Goods Orders release by giving us a measurement of manufacturing sector strength, except this one includes orders for both durable and non-durable goods. This data usually isn't a major influence on bond trading, but there is little chance of it impacting mortgage rates this tomorrow because the Employment report is an extremely important report. Analysts are expecting to see little change in new orders from September to October.