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Thursday’s bond market has opened in positive territory, extending yesterday’s afternoon rally. This morning’s early stock trading is also helping to boost bond prices as investors move funds into safety. The Dow is currently down 75 points while the Nasdaq has lost 13 points. The bond market is currently up 13/32, which will likely improve this morning’s mortgage rates by approximately .375 – .500 of a discount point if comparing to yesterday’s morning pricing. Many lenders revised rates lower during afternoon trading yesterday as the bond market steadily strengthened. How much of an improvement in this morning’s rates depends on how much of a revision was made to pricing intra-day yesterday.
The resolution in Washington is driving trading again this morning with today’s only economic data considered unreliable. While the deal in Washington doesn’t solve the two problems of a budget and debt ceiling, it does get the government reopen for business and avoids a default on our obligations for the time being. The topics will be debated again and we could be right back where we were yesterday in just a couple months, but it is a reprieve from the madness for now. It also will allow us to now see the economic reports that were delayed during the shutdown. Some of that data is considered to be key economic indicators and could heavily influence the financial and mortgage markets. Once government employees get back to work today and tomorrow, we should get updated release dates on those reports. They won’t be posted immediately as it will take a little time to compile the data and go through proper review and reporting channels before being released to the! public. As those dates are announced, they will be incorporated into our daily reports.
Yesterday’s afternoon release of the Fed Beige Book didn’t reveal any significant surprises but did indicate slightly slower economic growth in a couple Fed regions than was reported in its last survey. There were also indications of fear and uncertainty about the budget and debt ceiling issues affecting economic and employment growth. Overall though, the report didn’t reveal anything that was overly concerning or joyous to the bond market and mortgage rates. Even though the bond market rallied late yesterday, most of the move came before the Beige Book was posted.
This morning’s only economic data was last week’s unemployment numbers at 8:30 AM ET. They revealed that 358,000 new claims for unemployment benefits were filed last week, down from the previous week’s revised total of 373,000. While that is a decline in initial claims that is usually considered to be negative for mortgage rates, it was well above forecasts of 330,000. That means that more claims for benefits were filed than many had thought, so we can consider the data neutral-to slightly positive for the bond market and mortgage rates. Limiting a much more positive influence on mortgage rates is the fact that this data is still considered distorted from reporting problems and effects related to the government shutdown, making the data unreliable.
Tomorrow does have another piece of economic data set for release that was not affected by the shutdown because it is being posted by the Conference Board, who is a New York-based business research group and not a governmental agency. September’s LEI will be released by them at 10:00 AM ET tomorrow morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.6% from August’s reading. This would indicate that economic activity is likely to increase over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline.