Market Comment
Mortgage bond prices finished the week sharply higher which put downward pressure on rates. We started the week on a slightly positive note, sold off mid-week, and rallied to end the week. Most of the gains came in response to the weaker than expected employment report. FHFA housing rose 1.2% vs 0.1%. Consumer confidence was 97.0 vs 104.0. Q1 Employment cost index rose 1.2% vs 1%. ADP employment came in at 192K vs 175K. ISM index came in at 49.2 vs 50. The trade deficit was $69.4B vs $69.2B. Weekly jobless claims were 208K vs 212K. Mortgage interest rates finished the week better by approximately 3/4 of a discount point.
Looking Ahead
|
Indicator |
Release Date & Time |
Consensus Estimate |
Analysis |
| 3-year Treasury Note Auction |
Tuesday, May 7, 1:15 pm, et |
None | Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Consumer Credit |
Tuesday, May 7, 3:00 pm, et |
$20B |
Low importance. A significantly large increase may lead to lower mortgage interest rates. |
| 10-year Treasury Note Auction |
Wednesday, May 8, 1:15 pm, et |
None |
Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Weekly Jobless Claims |
Thursday, May 9, 8:30 am, et |
210K |
Important. An indication of employment. Higher claims may result in lower rates. |
| 30-year Treasury Bond Auction |
Thursday, May 9, 1:15 pm, et |
None |
Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates. |
| U of Michigan Consumer Sentiment |
Friday, May 10, 10:00 am, et |
78 |
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Employment Report
The Fed is clear they will not pivot from keeping rates higher until the data shows signs the rate hikes are working. The US Bureau of Labor Statistics Employment Situation Summary is the most important economic release each month. Last week’s report provided support for a rate cut sooner rather than later.
The release “presents statistics from two monthly surveys. The household survey measures labor force status, including unemployment, by demographic characteristics. The establishment survey measures nonfarm employment, hours, and earnings by industry.”
The household survey indicated,” Both the unemployment rate, at 3.9 percent, and the number of unemployed people, at 6.5 million, changed little in April. The unemployment rate has remained in a narrow range of 3.7 percent to 3.9 percent since August 2023.”
The establishment survey reported, “Total nonfarm payroll employment increased by 175,000 in April, lower than the average monthly gain of 242,000 over the prior 12 months. In April, job gains occurred in health care, in social assistance, and in transportation andwarehousing.”
It continued, “In April, average hourly earnings for all employees on private nonfarm payrolls increased by 7 cents, or 0.2 percent, to $34.75. Over the past 12 months, average hourly earnings have increased by 3.9 percent. In April, average hourly earnings of private-sector production and nonsupervisory employees edged up by 6 cents, or 0.2 percent, to $29.83.”
The weak payrolls component was a relief and mortgage rates dropped lower in response. If future economic releases show economic weakness we could see sustained downward pressure on rates. Any signs of strength will likely result in volatility.
