John’s Finance Corner: Shutdown Nears End as Markets Watch for Clarity
With the government shutdown still limiting access to critical economic data, both the Federal Reserve and bond investors have been navigating markets with little concrete information. Fortunately, it appears the shutdown may be nearing an end and once government agencies resume operations, a flood of delayed reports could soon reshape market expectations for bonds and mortgage rates.
During the blackout, private-sector data has taken on greater importance. The latest report from ADP, a leading payroll and employment data provider, showed that private employers added 42,000 jobs in October, beating expectations for a 24,000 gain. While that’s a welcome improvement after two consecutive months of job losses, overall job growth remains modest.
Over the past three months, the private sector has added only 10,000 jobs total, reflecting continued caution among employers. ADP Chief Economist Dr. Nela Richardson summarized the trend well:
“Private employers added jobs in October for the first time since July, but hiring was modest relative to what we reported earlier this year.”
Because government data remains unavailable, reports like ADP’s carry added weight in shaping monetary policy. As the Fed prepares for its early December meeting, markets are now leaning toward the expectation that no additional rate cut will be made at that time. Interestingly, that may actually provide some short-term relief for borrowers — the last two rate cuts triggered a rise in bond yields and mortgage rates, rather than the decline many expected.
This week, key inflation and retail sales reports are still delayed, leaving investors to focus on two upcoming Treasury auctions. These auctions will help gauge current demand for U.S. debt and could signal the near-term direction of mortgage rates.
As always, the 10-year Treasury yield remains the best daily indicator of rate movement:
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When yields decrease, mortgage rates tend to follow lower.
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When yields increase, mortgage rates typically move higher as well.
With the shutdown’s end seemingly in sight, all eyes will be on the data set to be released in the coming weeks and what it will reveal about inflation, employment, and the broader economy heading into year-end.
John Lamberg
MORTGAGE LOAN ORIGINATOR
NMLS 189233
