Thursday’s bond market has opened flat despite favorable economic news. The stock markets are showing minor losses during early trading with the Dow down 28 points and the Nasdaq down 3 points. The bond market is currently down 3/32 (1.90%), which should keep this morning’s mortgage rates very close to Wednesday’s levels.
Yesterday’s afternoon release of the Fed Beige Book didn’t reveal many surprises. It showed that economic activity grew at a modest or moderate pace in most Fed districts since the previous update. That was expected by many and didn’t have much of an impact on mortgage rates late yesterday.
March’s Housing Starts report was posted at 8:30 AM ET this morning, revealing a 2.0% increase in new home groundbreakings. While the increase does indicate growth in the housing sector, it was more than half the increase that was expected. So, even though the results are economic growth, it was so far below expectations that we can consider the data positive for mortgage rates. Unfortunately, this data is considered to be of low importance to the bond market or we could have seen a stronger reaction to the news.
Last week’s unemployment numbers were also posted early this morning. They indicated 294,000 new claims for unemployment benefits were filed last week, up from the revised total of 282,000 of the previous week. That was higher than most predictions, meaning the employment sector was softer than thought last week. Accordingly, we can also consider this slightly positive news for bonds and mortgage rates.
Tomorrow has three reports scheduled for release that have the potential to influence mortgage rates. March’s Consumer Price Index (CPI) is the first of the day, coming at 8:30 AM ET. This index is one of the more important pieces of data the bond market gets each month. It is similar to the Producer Price Index (PPI) but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. There are two readings in the index that traders watch- the overall and the core data that excludes more volatile food and energy prices. Analysts are expecting to see a 0.3% rise in the overall readings and a 0.1% increase in the core reading. The core data is the more important reading, which ideally would show a decline in prices at the consumer level, keeping inflation concerns subdued.
The University of Michigan’s Index of Consumer Sentiment will be posted at 9:55 AM ET tomorrow. This index will give us an indication of consumer confidence, which hints at consumers’ willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial or employment situations, they probably will delay making that purchase. This influences future consumer spending data and can have a moderate impact on the financial markets. Good news would be a sizable decline from March’s 93.0 reading. Current forecasts are calling for a reading of approximately 94.0.
The Conference Board will close out the week’s calendar with the release of their Leading Economic Indicators (LEI) for March at 10:00 AM ET tomorrow. This data attempts to measure economic activity over the next three to six months. This is considered to be only a moderately important report, so at best we can expect to see a slight movement in rates as a result of this data. It is expected to show a 0.3% increase from February’s reading, meaning it is predicting modest growth in economic activity over the next several months. A decline would be considered good news for the bond market and could lead to slightly lower mortgage rates.