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Wednesday’s bond market has opened in negative territory with this morning’s economic data giving us mixed results and stocks in positive ground. The major stock indexes are showing solid gains during early trading with the Dow up 88 points and the Nasdaq up 17 points. The bond market is currently down 7/32 (2.65%), which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.
March’s Housing Starts report was posted early this morning, revealing a 2.8% increase in groundbreakings of new home construction. This indicates some growth in the housing sector but since analysts were expecting to see a rise that was nearly double of what you got, we can consider the data slightly positive for the bond market and mortgage rates.
The second report of the morning was March’s Industrial Production data at 9:15 AM ET. It showed that output at U.S. factories, mines and utilities rose 0.7% last month that exceeded forecasts of 0.5%. Also, a sizable upward revision to February’s data (0.6% to 1.2%) means that industrial production was stronger than many had thought over the past two months. Because that points towards stronger economic activity, the data is negative for economically sensitive bonds and mortgage rates.
Also worth noting is speaking engagement by Fed Chairman Janet Yellen. She is scheduled to speak to the Economic Club of New York at 12:15 PM ET. Anytime the Fed chairman speaks publicly, market traders listen carefully for any tips on the Fed’s thought process or potential monetary policy moves. Therefore, it is worth watching even though it isn’t considered to be a highly important event.
Later this afternoon, we have the release of the Federal Reserve’s Fed Beige Book report. This report is named simply after the color of its cover but details economic conditions throughout the U.S. by Fed region. Since the Fed relies heavily on the contents of this report during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any significant surprises. Generally speaking, signs of strong economic growth or inflation rising from the last update would be considered negative for bonds and mortgage rates. Slowing economic conditions with little sign of inflationary pressures would be ideal for mortgage rates. The report will be posted at 2:00 PM ET, so any reaction will come during mid-afternoon trading.
Tomorrow’s only relevant data is the Labor Department’s weekly unemployment update. They will give us last week’s unemployment numbers early tomorrow morning. It is expected to show that 312,000 new claims for unemployment benefits were filed last week, up from the previous week’s 300,000. The larger the number of initial claims, the better the news it is for the bond market and mortgage pricing because rising claims indicate employment sector weakness.
The bond market will close early tomorrow ahead of the Good Friday and will reopen for regular trading Monday. The stock markets are open for a full day of trading tomorrow but will be closed Friday. It is fairly common to see a little pressure in bonds right before the holiday as investors look to protect themselves over the long holiday. With no major data set for release tomorrow, I would not be surprised to see bonds negative and mortgage rates slightly higher unless stocks decide to go into selling mode.