Market Comment

Mortgage bond prices finished the week near unchanged which held rates relatively steady. There was volatility throughout the week, but it was within a narrow range. We started the week on a negative note Tuesday morning with a slight increase in rates. The Fed continued their multi-billion-dollar daily MBS purchases which helped counter the selling pressure. The data was mixed. Construction spending rose 0.2% as expected. ISM Index was 61.2 vs the expected 61%. ADP employment surged higher with a reading of 978K vs the expected 700K. Weekly jobless claims were 385K vs the expected 390K. The employment report showed two very different pictures (read below.) Factory orders fell 0.6% vs the expected 0.5% increase. Mortgage interest rates finished the week unchanged to better by approximately 1/8 of a discount point.

Looking Ahead
Economic IndicatorRelease Date & TimeConsensus EstimateAnalysis
Consumer CreditMonday, June 7,
3:00 pm, et
$25.8BLow importance. A significantly large increase may lead to lower mortgage interest rates.
Trade DataTuesday, June 8,
8:30 am, et
$75.5B deficitImportant. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
3-year Treasury Note AuctionTuesday, June 8,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note AuctionWednesday, June 9,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Price IndexThursday, June 10,
8:30 am, et
Up 0.8%,
Core up 0.9%
Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.
Weekly Jobless ClaimsThursday, June 10,
8:30 am, et
387KImportant. An indication of employment. Higher claims may result in lower rates.
30-year Treasury Bond AuctionThursday, June 10,
1:15 pm, et
NoneImportant. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
U of Michigan Consumer SentimentFriday, June 11,
10:00 am, et
82.8Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Employment Results

The Bureau of Labor Statistics released the employment report for May last Friday. The data showed very different pictures of the labor market. The headline figure showed unemployment at 5.8% versus the expected 5.9%. On the surface this is positive for the economy. However, the payrolls component of the report was weaker than expected. Payrolls rose 559K vs the expected 650K increase. Payrolls often get more attention from market participants. Average hourly earnings were higher than expected with a 0.5% increase vs 0.2%. This is a signal of potential wage inflation and will have the attention of Fed members going forward.

The divergence in the data is not uncommon due to the fact that the “Bureau of Labor Statistics (BLS) has two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the household survey, and the Current Employment Statistics (CES) survey, also known as the payroll or establishment survey. Both surveys are needed for a complete picture of the labor market.”