Thursday’s bond market has opened in positive territory, extending yesterday’s momentum. The stock markets are flat with the Dow up a couple points and the Nasdasq nearly unchanged from yesterday’s close. The bond market is currently up 8/32 (2.39%), which should improve this morning’s mortgage rates by approximately .250 of a discount point over Wednesday’s morning pricing.
Today’s only relevant economic data was last week’s unemployment update at 8:30 AM ET. It showed that 311,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 290,000. This is good news for bonds and mortgage rates because new claims exceeded forecasts, indicating the employment sector was weaker last week than many had thought. Unfortunately, this is only a weekly report, so its impact on mortgage rates has been relatively minor.
We will get the results of today’s 30-year Treasury Bond auction at 1:00 PM ET. Yesterday’s 10-year Note sale wasn’t overly strong or weak. Several of the benchmarks we use to gauge investor demand in the sale showed an average level of interest. That doesn’t give us too much to be overly optimistic about in today’s sale, but not much to be concerned about either. If today’s auction did draw a high level of interest, we should see bond prices improve early this afternoon, possibly leading to a slight improvement in mortgage pricing.
The week does not end quietly tomorrow. There are three reports set for release that can affect mortgage rates. The first is August’s Producer Price Index (PPI) from the Labor Department at 8:30 AM ET, giving us an important measurement of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.2% increase in the overall index and a rise of 0.2% in the core data. Stronger than expected readings may raise inflation concerns in the bond market. That would be bad news for bonds and mortgage rates because inflation is the number one nemesis of the bond market as it erodes the value of a bond’s future fixed interest payments. As inflation becomes more of a concern in the markets, bonds become less appealing to investors, leadin! g to falling prices, rising yields and higher mortgage rates.
July’s Industrial Production report is scheduled to be posted at 9:15 AM ET tomorrow. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase from June’s level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and broader economic growth would be more difficult if manufacturing activity is slipping.
The last release of the week will be posted by the University of Michigan just before 10:00 AM ET tomorrow. Their Index of Consumer Sentiment will give us an indication of consumer confidence, which projects consumer willingness to spend. If a consumer’s confidence in their own financial situation is rising, they are more apt to make large purchases in the near future. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and therefore, impacts the financial markets. It is expected to show a reading of 81.7 that would mean confidence was nearly unchanged from July’s level of 81.8. That would be considered slightly favorable news for bonds and mortgage rates. Good news for mortgage shoppers would be a sizable decline in the index.