Weaker Data Endorses the In-Progress Rally
Who knows how today would have ended up if the relevant econ data had come in stronger than expected. Perhaps that would have been enough to see an earlier, more threatening sell-off in bonds. As it stands, we're heading out the door with moderate gains, even if we can't give clear credit to the data (because the gains happened before the data). Thursday brings another chance to see if different data (Jobless Claims, Challenger Layoffs, Revelio payrolls) will be worth any more of a response. Otherwise bonds are just grinding out a range ahead of next Wednesday's Fed Day.
Econ Data / Events
ADP Employment
-32k vs 10k f'cast, 42k prev
ISM Biz Activity (Nov)
54.5 vs -- f'cast, 54.3 prev
ISM Services PM I (Nov)
52.6 vs 52.1 f'cast, 52.4 prev
ISM Services Employment (Nov)
48.9 vs -- f'cast, 48.2 prev
ISM Services New Orders (Nov)
52.9 vs -- f'cast, 56.2 prev
ISM Services Prices (Nov)
65.4 vs -- f'cast, 70.0 prev
Market Movement Recap
08:37 AM 10yr down 3bps at 4.06 and MBS up more than an eighth of a point even before the ADP data. Little-changed since then.
10:02 AM No major reaction to ISM data. MBS up an eighth and 10yr down 2.2bps at 4.069
10:38 AM Session lows with MBS down 5 ticks (.16) from AM highs (still up on the day, barely). 10yr down less than 1bp now and up more than 3bps from the lows at 4.084
12:43 PM bouncing back a bit. MBS up 3 ticks (.09) and 10yr down 2.3bps at 4.068
03:59 PM MBS up 5 ticks (.16) and 10yr down 3.1bps at 4.06
Mortgage rates improved more noticeably today, and while the average rate isn't quite as low as it was last week, it's fairly close. Rates are based on movement in the bond market. Bonds were most likely to move in response to one or both of today's big economic reports. Oddly enough, most of the bond market improvement was seen overnight, BEFORE the economic data came out. Nonetheless, the data definitely didn't hurt.
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10yr yields are almost 4bps lower in early trading and the ADP employment report came in at -32k vs a +10k forecast. The logical conclusion would be that the data is responsible for the rally, but there was actually a remarkably light reaction to the data, both in terms of volume and volatility. Most of the gains arrived between 6am and 7:30am ET and yields are actually back in line with pre-ADP levels by 8:30am. The morning's next big report is ISM Services at 10am ET.
Steady Gains Throughout The Day
Bonds began the day in modestly weaker territory although MBS were fairly quick to get back to 'unchanged' while 10yr Treasuries couldn't duplicate that feat until the afternoon. There were no clear correlations with other markets and no notable risks on the econ calendar. The gains were slow and steady enough to suggest an absence of discrete catalysts. That could change on Wednesday with the confluence of ADP and ISM Services--both capable of influencing the bond market, even before the shutdown data dynamics temporarily magnified private data's importance.
Econ Data / Events
ISM Manufacturing Employment (Nov)
44.0 vs -- f'cast, 46.0 prev
ISM Manufacturing PMI (Nov)
48.2 vs 48.6 f'cast, 48.7 prev
ISM Mfg Prices Paid (Nov)
58.5 vs 59.5 f'cast, 58.0 prev
Market Movement Recap
10:38 AM Weaker start, but bouncing back a bit now. MBS up 2 ticks (.06) and 10yr yield up 1bp at 4.098
01:13 PM Best levels of the day with MBS up 3 ticks (.09) and 10yr up only half a bp at 4.092
03:43 PM Just a bit stronger. MBS up 5 ticks (.16) and 10yr down 0.1bps at 4.087
Watching Rates
Check our some recent articles and posts about current rates.
Mortgage rates improved more noticeably today, and while the average rate isn't quite as low as it was last week, it's fairly close. Rates are based on movement in the bond market. Bonds were most likely to move in response to one or both of today's big economic reports. Oddly enough, most of the bond market improvement was seen overnight, BEFORE the economic data came out. Nonetheless, the data definitely didn't hurt.
Unlike Monday, which saw a fairly brisk move toward higher rates, Tuesday barely budged. Additionally, the budging occurred in a friendly direction with the average lender offering rates that were just a hair lower than yesterday's. Starting tomorrow morning, this week's potential volatility will be higher. Each day brings several economic reports with the power to push rates higher or lower. Wednesday/tomorrow is probably chief among these due to the ADP employment report and a closely watched service sector report from ISM.
Mortgage rates are based on bonds and the bond market is prone to erratic behavior on major holiday weeks. One of the more common patterns is for the holiday week to see a noticeable departure from a prevailing trend only to return to that trend in the following week. That's exactly what we're seeing on the first day of the new week. The prevailing trend saw rates hold a narrow, sideways range with the average top tier 30yr fixed rate in the 6.3s. Last week saw that average drop to 6.20% and now today, we're right back up to 6.31%. [thirtyyearmortgagerates] In the coming days, economic data should have a bigger impact on rates than the sort serendipity at work today.
As is most often the case, the Friday after Thanksgiving added nothing interesting to mortgage rate momentum. The average lender's top tier 30yr fixed rate is exactly where it was on Wednesday. The underlying bond market closes early today, but will be fully open next week. At that point, we're likely to see some volatility return for rates, depending on the results of economic reports.
