Thursday’s bond market has opened in negative territory following stronger than expected economic data. The stock markets are showing early strength with the Dow up 60 points and the Nasdaq up 4 points. The bond market is currently down 10/32 (1.89%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
We had two pieces of economic data posted this morning. The first was last week’s unemployment figures at 8:30 AM ET that showed 268,000 new claims for unemployment benefits were filed. That was well below estimates of 285,000 and a noticeable decline from the previous week’s revised 288,000 initial claims. Since analysts were expecting to see a small increase in new claims, not a decline, we should consider the data negative for the bond and mortgage markets. Fortunately though, this is only a weekly snapshot so it has had a fairly minimal impact on this morning’s mortgage rates.
February’s Factory Orders came at 10:00 AM ET. The Commerce Department announced a 0.2% increase in new orders at U.S. factories for durable and non-durable goods. This was stronger than the 0.5% decline that was expected, pointing toward a better than though manufacturing sector. However, offsetting this news slightly was a good-sized downward revision to January’s orders that means activity was softer than previously thought. This report can be considered negative for mortgage rates but the truth is that it has not had too much influence on this morning’s rates either.
The biggest news of the week will come early tomorrow morning when the Labor Department posts March’s Employment report, revealing the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 5.5% and that approximately 248,000 payrolls were added to the economy during the month. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and could likely push mortgage rates lower tomorrow morning because it would indicate weaker than thought conditions in the employment sector of the economy.
It appears that many bond traders are expecting favorable results in tomorrow’s major release. This can be seen in the move that bonds have made this week. The problem with good news built in already (weaker numbers), is that slightly weaker than forecasted numbers will be of no surprise and usually does not bring the favorable reaction in bonds that many expect. And if the numbers end up meeting forecasts, they are treated as strong and cause a noticeable negative reaction in bonds and mortgage rates. This isn’t supposed to suggest that there is no chance of bonds and mortgage rates improving tomorrow morning. It simply means that there may already be a hill in front of us to climb before the report is even posted.
Also worth noting about tomorrow is the fact that the stock markets will be closed in observance of the Good Friday holiday, but bonds will be open until noon ET. This will allow bonds to react to the Employment report without the influences of stock trading. All markets will reopen Monday for regular trading and there is no early close today.