Wednesday, August 2, 2017

Mid Day update - The ADP employment report released this morning showed weaker private payroll growth at 178k than surveyed at 190k. While still above last month’s growth of 158k, it does cast doubts about the strength of the non-farm payroll numbers to be released on Friday. The MBA's weekly mortgage application survey was also released this morning. Applications fell 2.8% last week with refinances down 3.8% and purchases down 2.0%. The average 30-year FRM rate held firm week-over-week at 4.17%.

Markets are slower today, coming off yesterday when a number of desks were seeing heavy flows due to the first business day of the month. Treasury yields are down very slightly with MBS down 4 bps now.

Opening comments 

What's going on and why does it matter? Mortgage bonds are trading at their highest levels since June, as they've been driven higher by weaker than expected economic data this week.  However, today's ADP employment numbers came out close to market expectations.  This report is normally interpreted as a sneak preview into Friday's official payroll numbers. This may cause mortgage bonds to give back some of the gains from their recent rally. The Fed is scheduled to purchase up to $1.65 billion of 30-year conventional mortgage bonds today, and this may help to stabilize the market. What should you do about it? It's probably a good idea to lock your rate while bond prices remain near the top of their recent trading range. ..... ..... Economic reports that may impact mortgage rates this week: Date Report Period Prior Estimate Actual Mon 31 Jul Chicago PMI July 65.7 60.0 58.9 Tue 1 Aug Personal Income June 0.4% 0.4% 0.0% Tue 1 Aug Core PCE Prices June 0.1% 0.1% 0.1% Tue 1 Aug Construction Spending June 0.0% 0.4% -1.3%  Tue 1 Aug ISM Mfg. PMI July 57.8 56.5 56.3 Tue 1 Aug Total Vehicle Sales July 16.51M 16.8M 16.73M Wed 2 Aug ADP National Employment July 158,000 185,000 178,000 Thu 3 Aug Initial Jobless Claims Week of July 24 244,000 242,000 Thu 3 Aug Factory Orders June -0.8% 2.9% Thu 3 Aug ISM Non-Mfg PMI July 57.4 57.0 Fri 4 Aug Non-Farm Payrolls July 222,000 183,000 Fri 4 Aug Average Earnings July 0.2% 0.3%