Friday’s bond market has opened in positive territory following weaker than expected employment data. Stocks are rallying on the same data because it may make it harder for the Fed to raise key rates again. The Dow is up 308 points while the Nasdaq has gained 438 points. The bond market is currently up 8/32 (5.20%), which combined with yesterday’s strong late morning rally should allow for this morning’s mortgage rates to be approximately .500 - .625 of a discount point lower than Thursday’s early pricing. The actual size of this morning’s change will depend on how much of an intraday improvement you saw yesterday.

This morning’s major economic release was September’s governmental Employment report at 8:30 AM ET. It gave the bond market the trifecta with softer than expected numbers in all three of the major readings that are most influential on bond trading. First, the report revealed that only 29,000 new jobs were added to the economy last month, falling short of the 90,000 – 95,000 that were expected. Also worth noting were downward revisions to August’s and July’s payroll numbers to reduce the year-to-date total by 60,000 jobs. Furthermore, the unemployment rate rose from August’s 4.1% to 4.2% last month.

The third headline was the average hourly earnings reading that showed only a 0.1% increase when forecasts had it at 0.3%. This helped allow the annual increase to slip 0.1% to 3.0%. This particular reading is influential on bonds because rising wages fuels inflation across the broader economy and weaker inflation numbers make bonds more appealing to investors.

September’s Employment data lowers the possibility of the Fed making another rate hike at their next FOMC meeting. The Fed has a dual mandate of keeping prices (inflation) under control and to maximize employment. Raising key short-term interest rates is done to slow the economy and ease inflation. However, slowing the economy puts pressure on the employment sector. The weaker employment data raises the question, if the Fed acts again, would it hurt employment that is already showing signs of slowing? In other words, the Fed is likely to wait a while to see how much of an impact their last increase will have before making further moves.

The bond market is clearly responding favorably to this morning’s report. That said, the bond market was quite concerned about inflation over the past few weeks and wanted the Fed to take action. They did by raising key rates a quarter-point last month. However, if the Fed is going to take a wait and see approach going forward, will the bond market be patient enough to wait with them? That question will be answered in the coming weeks, but it is something that should be considered if trying to decide when to lock and interest rate.

Posted late this morning was August's Factory Orders report that revealed a 0.1% rise in new orders for durable and non-durable goods at U.S. factories. This was close to expectations of no change and the report itself doesn’t carry a high level of importance. Therefore, it has had no impact on this morning’s mortgage pricing.

Next week has a few relevant economic reports set to be posted in addition to a couple of long-term Treasury auctions and the release of the minutes from last month’s FOMC meeting. The week’s calendar will start with the ISM non-manufacturing (aka service) index at 10:00 AM ET Monday. We will also be watching for movement in oil prices and headlines from the Middle East as influences to drive bond trading and mortgage pricing. Look for details on all of next week’s scheduled activities in Sunday evening’s weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.