Friday's bond market has opened down sharply following the release of some very unfavorable economic news. The stock markets are reacting positively to the same data, pushing the Dow higher by 77 points and the Nasdaq up 20 points. While those are moderate gains in the major stock indexes, the bond market has reacted much more drastically. The 10-year Treasury Note is currently down 49/32, driving its yield up to 2.68%. That should translate into a spike in mortgage rates of approximately a full discount point from Wednesday's morning pricing.

The U.S. markets were closed yesterday in observance of the Independence Day holiday and closed early Wednesday. As the markets closed Wednesday we saw some selling in bonds as investors prepared for the holiday. This caused some lenders to revise their rates higher while others may have waited until this morning to reflect that change. However, most of this morning's increase is a result of today's economic data, not Wednesday afternoon weakness.

Today's big news came from the Labor Department, who released June's employment figures early this morning. They announced that the U.S. unemployment rate remained at 7.6% last month and that 195,000 new jobs were added to the economy. The release also showed upward revisions to May's and April's job numbers, adding 70,000 more jobs than previously announced. The unemployment rate matched forecasts but the payroll number was 30,000 higher than expected. Even the average earnings reading jumped more than predicted with a 0.4% increase in earnings.

I am not sure that we could have realistically expected a worse report for the bond market than we got today. The new payroll increases over the past three months means we are adding an average of 202,000 jobs a month over the past six months. There were some bits of interesting data such as a significant spike in part-time jobs, which are usually taken due to financial need and are not permanent career oriented positions. Still, the headline numbers have done the damage this morning as they seem to support the theory that the Fed will begin easing their bond buying program (QE3) as soon as September of this year. Unfortunately, today's events also helps clear the way for the benchmark 10-year Note yield to likely continue moving towards 3.0% as predicted last week, bringing mortgage rates up with it.

Next week brings us few economic reports for the markets to digest, but the couple that are scheduled will draw a fair amount of attention from traders. There are also a couple of Treasury auctions on the calendar that can influence mortgage rates, but with the recent selling in bonds it is hard to predict a strong demand for them. None of the events will take place Monday or Tuesday, so we will probably see the most movement in rates the middle or latter part of the week, although a weak afternoon for bonds today could lead to an extension into Monday's early trading.

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... Lock if my closing was taking place over 60 days from now.