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Wednesday’s bond market has opened in negative territory with nothing to drive trading again today. Even the major stock indexes are having little influence on bond trading with the Dow down 24 points and the Nasdaq up 9 points. The bond market is currently down 6/32, which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
As is the case with most of this week, today has nothing scheduled that is of any concern to the bond or mortgage markets. Any intra-day revision to mortgage rates will likely have come from a noticeable move in stocks. Stock strength usually translates into bond selling and higher mortgage rates while stock selling makes bonds more attractive to investors. The buying of bonds pushes yields lower and since mortgage rates tend to follow bond yields, this would be good news for mortgage shoppers.
Tomorrow has all of this week’s economic data that is even remotely relevant to mortgage rates. There are actually three pieces of data being posted tomorrow, but the first is only the weekly unemployment update at 8:30 AM ET. The Labor Department is expected to announce that 327,000 new claims for unemployment benefits were filed last week. This would be a slight change from the previous week’s total of 326,000, assuming there is not a revision to that estimate. The higher the number of initial filings, the better the news it is for the bond market and mortgage rates because rising claims indicates a softening employment sector. However, since this report tracks a only a single week’s worth of new claims, it usually requires a wide variance from forecasts for it to have a noticeable impact on mortgage pricing.
The week’s remaining two pieces of data will be released at 10:00 AM ET tomorrow by private-sector organizations. The first of those two is December’s Existing Home Sales from the National Association of Realtors. This data will give us a measurement of housing sector strength and mortgage demand by tracking home resales in the U.S. It is expected to show little change in sales from November’s level, meaning the housing sector was flat last month. Ideally, bond traders would like to see a decline in sales that would point toward housing sector weakness because a weakening housing sector makes broader economic growth more difficult. However, as long we don’t see a significant surprise in its results, it shouldn’t have a noticeable impact on tomorrow’s mortgage rates.
December’s Leading Economic Indicators (LEI) is the final report of the week. The Conference Board, who is a New York-based business research group compiles the data and releases this report. It attempts to predict economic activity over the next several months, but it is not considered to be of high importance to the financial and mortgage markets. Tomorrow’s release is expected to show a 0.2% increase, meaning the indicators are predicting a modest increase in economic activity this spring. Theoretically, that would be fairly good news for mortgage rates because long-term securities such as mortgage-related bonds tend to do better in weaker economic conditions. But as long as we don’t see a much stronger than predicted increase, I don’t think this data will have much of an influence on mortgage pricing either.