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March 29, 1996
For the third straight week, mortgage rates held within the same, tight trading range: 8.00% to 8.25% (at "zero and zero"), and finished the week at the high.
I hope everybody has gotten all rested up in this nice, calm, spring break for bonds. By Monday, April 8, economic news magnified by a calendar quirk could drive mortgage rates anywhere from 7.50% to, gulp, 9.00%.
By now, anyone with even a passing curiosity about interest rates should know that the first week of every month is Mad Cow week. By the end of this one, there might be a Mad Easter Bunny, too.
In the first few days of each month, the National Association of Purchasing Managers releases its index ("NAPM"), and on the first Friday, the Labor Department delivers payroll data. The bond market has not remotely recovered from the March 8 payroll panic, and these two "first week" reports will have more than their usual, immense impact.
Next week has an appropriate beginning: Monday is April Fool's Day, and NAPM release day. A reading under 45% will help rates, and any rebound over 50% will hurt. (April Fool's Day is also the anniversary of this publication, now beginning its ninth year. Draw any conclusion you wish.)
NAPM is important, but the new payroll data are the main event. The release day is Friday, April 5, which is also Good Friday, a formal holiday on which the bond market will be closed. For the second time in three years, oblivious to frayed, pre-holiday nerves, the Labor Department will stick with its "first Friday" policy.
Two years ago, the economy showed surprise strength, the Fed started to tighten in February, and mortgage rates had risen from 7.25% to 8.50% in only 60 days (sound familiar?). On 1994's macabre calendar, Good Friday was also April Fool's Day, and the Labor Department's first Friday. We all hoped that payrolls wouldn't be too strong.
Hah. When "456,000" hit screens, the best we could do was to call clients and tell them that Monday was going to be bad -- very bad -- and since markets were closed, there was nothing we could do about it. Great calls, those.
Memo to Labor Department: never give traders three days to digest bad news. Monday morning: 9.25%. Up three quarters of a percent in one very long weekend.
Please don't read a negative prediction into my memory of 1994: anything can happen next Friday. What if the February 705,000 surge reported on March 8 is revised to 205,000? (Dang computers: counted California twice.) Or confirmed? What if March comes in at 600,000, or 60,000, or loses jobs?
You might let your clients in on the event, and even waste some holiday morning sleep. CNBC, 6:30am, drum roll pleaseŠ.
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