Market Update: Rates Trend Higher in Response to Resilient Economic Data

Blog posted On July 03, 2023

Rates were relatively unchanged throughout the majority of last week until the release of certain economic data that proved the economy resilient. A resilient or strong economy typically means bad news for the bond market and thus rates. This week holds even bigger market moving reports with the jobs data.

Last week, rates responded to the upward GDP trend and the downward jobless claims trend. The GDP estimate for quarter one was revised up by 0.6%. GDP, or gross domestic product, measures the yearly change in the inflation-adjusted value of all goods and services produced by the economy. It’s typically the broadest measure of economic activity and key indicator of economic health. The generally higher the GDP output, the worse for rates. Jobless claims obviously measure the level of unemployment in United States. The higher the jobless claim number, the better for rates (all other things being equal). So, the fact that jobless claims are decreasing isn’t great rate news.

However, this is all overshadowed by this week’s highly anticipated release of June’s employment situation reports. These reports include average hourly earnings, unemployment, nonfarm payrolls, and more. The Fed has been closely watching these reports in hopes of a weaker jobs market in order to further their mission to lower inflation levels. Depending on how these reports come in, rates could respond differently. Rates could increase if this data comes in stronger or higher than expected, while they might decrease if it comes in below expectations.

As always, we’ll keep you updated on all the market happenings. Let us know if you have any questions about this week’s events.  

Sources: Bloomberg, Mortgage News Daily