Friday’s bond market has opened in positive territory even though today’s only relevant economic data appeared to give us strong results. The major stock indexes are mixed with the Dow down 9 points and the Nasdaq up 32 points. The bond market is currently up 8/32 (1.92%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
The Commerce Department announced early this morning that new Durable Goods Orders rose 4.0% last month, exceeding forecasts of a 0.5% increase. The headline number appears to show manufacturing sector growth that would be bad news for bonds and mortgage rates. However, a secondary reading that excludes orders for more volatile and costly transportation-related products such as new airplanes, actually showed a 0.2% decline when analysts were expecting a 0.4% increase. This means that if the transportation orders are stripped, durable goods demand fell last month. That is an indication of manufacturing sector weakness, making the data slightly favorable for bonds and mortgage rates.
I would not be surprised to see some afternoon movement in bonds as traders prepare for next week’s activities that include an FOMC meeting, possibly leading to an afternoon improvement in rates. I am not necessarily expecting stocks to drive bond trading, although a significant move either direction for stocks certainly can influence bonds. With the benchmark 10-year Treasury Note yield near the upper end of its recent trading range, the risk for higher rates is minimal in my opinion. At least until we get to some of next week’s events.
Next week is packed with important data and events that have the potential to affect mortgage rates. None of it is scheduled for Monday, but there is at least one item set for every other day of the week with some of them considered to be highly important to the financial and mortgage markets. Look for details on those and the rest of next week’s calendar in Sunday evening’s weekly preview.