Thursday’s bond market has opened in positive territory, extending yesterday afternoon’s rally. The stock markets are showing hefty losses during early trading with the Dow down 226 points and the Nasdaq down 86 points. The bond market is currently up 13/32 (2.08%), which with yesterday’s late gains should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point over Wednesday’s early pricing.
The bond market strengthened a little bit during early afternoon trading yesterday but picked up steam following the release of the FOMC minutes. The 2:00 PM ET release indicated that the Fed may not be as anxious to start raising key short-term interest rates as many had thought. Their comments and voting raised the possibility that the first rate hike may not come at next month’s FOMC meeting after all. Their specific concerns were inflation that is still well below their ideal level and concerns about the global economy that could have a negative impact on ours. The fact that the big picture points towards concerns about economic growth made bonds more attractive to investors late yesterday. Many lenders issued intraday rate improvements, so how much of an improvement you will see this morning depends on the size of the adjustment that was made yesterday afternoon.
Last week’s unemployment figures kicked off today’s three pieces of relevant data. They showed that 277,000 new claims for unemployment benefits were filed last week. This was a little higher than expectations and an increase from the previous week’s revised 273,000 initial claims. This is good news for mortgage rates, especially since analysts were calling for a small decline in new claims because rising claims are a sign of employment sector weakness. However, this is only a weekly snapshot and does not carry much significance unless it shows a wide variance from forecasts. Therefore, its impact on today’s bond trading and mortgage pricing has been minimal.
The National Association of Realtors announced late this morning that July’s Existing Home Sales rose approximately 2.0% when analysts were expecting to see a decline of 1.0%. That means the housing sector was stronger than expected last month, making the data negative for bonds and mortgage rates.
Lastly, the Conference Board said its’ Leading Economic Indicators (LEI) for July slipped 0.2%, meaning they are predicting slower economic activity over the next couple months. Analysts were expecting to see an increase of the same size, so we can consider this report good news. Unfortunately, it is not considered to be highly important and hasn’t done much to spur bond buying this morning.
Tomorrow has nothing of importance set for release, so we can expect stocks to have the biggest influence on bond prices and mortgage rates. I am expecting to see a pretty quiet day, but keep an eye on the markets because things can change quickly. This is particularly true if stocks make a move either direction.