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Thursday’s bond market has opened down slightly due to stronger than expected economic data and early gains in stocks. The Dow is currently up 67 points and the Nasdaq has gained 14 points. The bond market is currently down 2/32, which with yesterday’s afternoon sell-off should put this morning’s mortgage rates approximately .500 of a discount point or .125% in rate higher than Wednesday’s morning levels.
The first of this morning’s three pieces of economic data that we were watching was last week’s unemployment figures at 8:30 AM ET. They showed that 320,000 new claims for unemployment benefits were filed last week, up from the previous week’s unchanged 315,000. By theory, the increase is good news for bonds and mortgage rates because rising claims points towards a softening employment sector. However, since analysts were expecting to see 330,000 initial claims, we should consider the results slightly negative for mortgage rates as they indicate the labor market was a little stronger than thought.
We got the other two reports at 10:00 AM ET. The National Association of Realtors said in their Existing Home Sales report that home resales fell 0.4% last month. That matched forecasts but did drop sales to their lowest level since July 2012. Because that means the housing sector is not growing, it is favorable news for the bond market and mortgage rates. Unfortunately, the fact it was expected is preventing a positive reaction in this morning’s trading.
And the Conference Board closed this week’s economic calendar when it released its Leading Economic Indicators (LEI) for February, revealing a 0.5% increase when analysts were forecasting a 0.3% rise. That means the indicators are predicting stronger economic growth over the next several months than previously thought. While this is not considered to be a major release or highly tracked data, it still gave us results that hinted at stronger than expected economic activity. Therefore, the data is also slightly bad news for the bond and mortgage markets.
Tomorrow has nothing scheduled in terms of economic data. There is a Fed member speaking engagement around lunch time and a couple more after the markets close. I am not expecting the earliest speech to affect bond trading or mortgage rates and the other two won’t take place until we are done for the week. It is much more likely that stock movement will drive bond trading and possibly mortgage rates tomorrow. If we see stocks move higher, we can expect more pressure in bonds, moving the benchmark 10-year yield and mortgage pricing higher. On the other hand, stock weakness should translate into bond gains and slightly lower mortgage rates tomorrow.