Updated on July 2, 2020 10:19:04 AM EDT
Yesterday’s afternoon release of the minutes from the June 9-10th FOMC meeting did not give us any big surprises. They showed that the Fed is prepared to keep key short-term interest rates at current levels for the foreseeable future and that there is a consensus that further financial assistance from Congress would be helpful in preventing a long-term pandemic impact on the economy. Bonds moved slightly lower in price after the minutes were posted at 2:00 PM ET, but it was not enough for lenders to revise rates higher before closing.
Today’s major economic release was June’s Employment report at 8:30 AM ET that showed 4.8 million jobs were recovered during the month while the unemployment rate slipped to 11.1%. Forecasts were calling for 3.25 million new jobs and a 12.2% unemployment rate, making both readings bad news for bonds and mortgage rates as they indicate the employment sector was stronger than thought. While Treasury bonds have reacted negatively to the news, mortgage bonds have held steady. It is apparent that traders did not have a lot of faith in the forecasts, so this morning’s data didn’t come as a big surprise.
The second report of the morning was last week’s unemployment figures. They revealed that 1.427 million new claims for unemployment benefits were filed last week, down slightly from the previous week’s revised 1.482 million. However, they were still a little higher than expectations. That allows us to consider the data favorable for bonds and mortgage pricing as it points towards employment weakness.
Mays Factory Orders report was posted late this morning. It showed that new orders at U.S. factories jumped 8.0%, matching expectations. This is normally moderately important data because a good part of it is included in the Durable Goods Orders report that precedes this release. It has had no impact on today’s bond trading or mortgage rates.
The bond market will close at 2:00 PM ET today while stocks are set for a full session. All the markets will be closed tomorrow for the Independence Day holiday and will reopen for regular trading Monday morning. The pre-holiday early close sometimes creates pressure in the bond market as traders look to protect themselves while U.S. markets are closed for the extended weekend. Because the markets will be closed and there is no relevant economic data scheduled for release, this report will not be updated tomorrow morning. Next week’s light calendar will be addressed in Sunday evening’s weekly preview.
©Mortgage Commentary 2020