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Tuesday’s bond market has opened in positive territory with stocks showing early weakness and nothing of relevance in terms of economic data scheduled for today. The Dow is currently down 43 points while the Nasdaq is nearly unchanged from yesterday’s close. The bond market is currently up 5/32, but that is not enough to offset weakness during afternoon trading yesterday. Many lenders revised pricing higher Monday afternoon, so how much of a change you will see this morning depends on how much of a revision was made by your lender intra-day yesterday. The net difference should be approximately .125 of a discount point higher than yesterday’s morning pricing.
Following a dull day today, tomorrow has three events scheduled that may influence mortgage rates. The first is October’s Goods and Services Trade Balance at 8:30 AM ET. This report gives us the size of the U.S. trade deficit, but it is considered to be of low importance to mortgage rates. It is actually the week’s least important monthly report and tends to affect the value of the U.S. dollar versus foreign currencies more than mortgage-related bonds. However, the value of the dollar does indirectly affect some bond trading because it can influence how appealing U.S. securities are to international investors. Still, unless it varies greatly from forecasts, I don’t expect this data to have an impact on tomorrow’s mortgage pricing. Forecasts are calling for the report to show a $40.5 billion trade deficit, declining from September’s deficit.
The next event on tomorrow’s calendar is the release of September and October’s New Home Sales reports at 10:00 AM ET. This Commerce Department report will give us an indication of housing sector strength. September’s data was delayed during the government shutdown, so we will get both reports tomorrow. This data is not considered to be highly important because new home sales make up only a small portion of all homes sold in the U.S. Analysts are expecting to see an increase in September’s sales but a decline in October’s sales. Ideally, bond traders prefer to see declining sales as it would point towards weakness in the housing sector. However, unless there is a significant surprise in the results, the data will probably have only a modest impact on tomorrow’s mortgage rates.
Lastly, the Federal Reserve will release their Beige Book at 2:00 PM ET tomorrow. This report, which is named simply after the color of its cover, details economic conditions by Fed region. That information is relied upon heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any noticeable changes from the last update. More times than not though, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist. Therefore, we will be watching it for any noticeable changes.