Tuesday’s bond market has opened down slightly even though we got some favorable economic news this morning. Stocks are mixed again with the Dow up 76 points and the Nasdaq down 8 points. The bond market is currently down 3/32 (1.78%), which should keep this morning’s mortgage rates very close to yesterday’s early pricing.
There was only one piece of economic data released this morning. The Commerce Department announced that March’s Housing Starts fell a surprising 8.8%. Analysts were expecting to see a decline, but a very small drop in new groundbreakings. This size of a decline raises concerns about the new home portion of the housing sector. Since housing sector weakness makes it more difficult for the broader economy to expand, this is good news for bonds and mortgage rates. Unfortunately, this particular report is not considered to be highly important to the markets, so its impact on today’s mortgage pricing has been hard to notice.
We get more housing news tomorrow morning with the release of March’s Existing Homes Sales numbers from the National Association of Realtors. This 10:00 AM ET report will give us an indication of housing sector strength and mortgage credit demand. It is considered to be moderately important to the markets, but can influence mortgage pricing if it shows a sizable variance from forecasts. Ideally, the bond market would like to see a drop in home resales because soft housing undermines economic growth and makes long-term securities such as mortgage-related bonds more attractive to investors. Analysts are expecting to see an increase in sales between February and March. The larger the increase, the worse the news it is for bonds and mortgage rates.
There is no economic data or other events scheduled the rest of the week that we should be too concerned with. If we see a drastic move in bonds and mortgage rates, it will likely come as a result of a significant move in stocks. Since we are in corporate earnings season, such a move is certainly possible. However, I still believe we are likely to see a fairly calm week in rates.