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Friday’s bond market has opened in negative territory following the release of mixed economic data and early stock gains. Stocks are showing relatively minor gains with the Dow up 51 points and the Nasdaq up 1 point. The bond market is currently down 5/32, but due to strength in trading late yesterday, this morning’s mortgage rates will likely be very close to yesterday’s morning pricing.
We saw some strength in bonds yesterday afternoon after the 30-year Bond auction results were posted. They indicated a fairly good demand with some gauges showing better results than others. As a whole, it was a pretty good sale and just a bit better than Wednesday’s 10-year Note auction. That led to some additional buying during afternoon hours and caused some lenders to slightly improve rates late in the day while others may have chosen to await today’s data before reflecting that move.
There were two pieces of economic data posted this morning. The first was January’s Industrial Production data at 9:15 AM ET. It revealed that output at U.S. factories, mines and utilities fell 0.3% last month. This was well off expectations of a 0.3% rise in production, hinting at a softening manufacturing sector. However, many believe the decline was more a result of weather-related issues than an actual slowdown in demand. In other words, they are discounting the credibility of the data, preventing a positive reaction in the bond market and mortgage rates.
The week’s calendar closed with February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment late this morning. This index measures consumer willingness to spend, which is believed to indicate future consumer spending trends. If consumers are more confident in their personal financial and employment situations, then they are more apt to go out and make a large purchase in the near future. Today’s release revealed a reading of 81.2 that matched January’s final reading. That means sentiment remained flat from the end of last month to the first part of this month. Unfortunately, analysts were expecting to see a decline and the flat reading indicates that consumer sentiment was a little stronger than thought. Accordingly, we should consider this data slightly negative for the bond market and mortgage rates.
Next week is a holiday-shortened week with the financial and mortgage markets closed Monday for President’s Day. There is no early close today and I am not expecting to see considerably thinner trading this afternoon as we do ahead of some holidays. The markets will reopen Tuesday for regular trading hours. I don’t see anything of importance scheduled for Tuesday but the latter part of the week does have several items that are relevant to mortgage rates, including a couple of key inflation readings and the minutes from the most recent FOMC meeting.