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Thursday’s bond market has opened down slightly following the release of mixed economic data. The stock markets are mixed also with the Dow down 6 points and the Nasdaq up 12 points. The bond market is currently down 2/32, but we should still see an improvement of approximately .125 of a discount point in this morning’s mortgage rates due partly to strength late yesterday.
March’s Durable Goods Orders was posted at 8:30 AM ET, revealing a 2.6% increase in new orders for big-ticket items at U.S. factories and manufacturers. Durable Goods are products that are expected to last three or more years, such as airplanes, appliances and electronics. Forecasts were calling for an increase in new orders of 2.0%, but since this data is known to be extremely volatile, the variance in the headline number wasn’t much of a concern. However, a secondary reading that tracks new orders with more pricey and volatile transportation items (airplanes) excluded showed a 2.0% increase when it was expected to rise only 0.5%. With the more volatile items removed, that is a wide enough variance to consider the report a sign of manufacturing strength and makes the report bad news for bonds and mortgage rates.
Also early this morning was the release of last week’s unemployment figures. It showed that 329,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 305,000. This means that the employment sector was softer last week than many had thought. Therefore, as with any sign of economic weakness, we should consider the data favorable for mortgage rates.
We also have today’s 7-year Treasury Note auction to watch. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. Yesterday’s 5-year Note sale didn’t go particularly well, so we don’t have a lot to be optimistic about in today’s auction. If the auction is met with a decent level of interest from investors, we could see bond prices improve and mortgage rates move slightly lower this afternoon. A similar level of demand as yesterday may lead to bonds slipping from their lunchtime levels, potentially causing an upward move in rates. We saw afternoon strength in bonds yesterday, but they were already gaining momentum before the auction results were posted.
Tomorrow has one economic report that may influence mortgage rates. The University of Michigan’s revised Index of Consumer Sentiment for April will be posted just before 10:00 AM ET tomorrow. This report gives us an indication of consumer sentiment and their willingness to spend. Current forecasts are calling for little change from the preliminary reading of 82.6. This means that surveyed consumers were just as optimistic about their own financial situations as they were earlier this month. This data is relevant because if consumers feel better about their own financial and employment situations, they are more apt to make a large purchase in the near future, fueling economic growth. I don’t expect this report to have a significant impact on bonds and mortgage pricing unless it shows a noticeable revision.