Wednesday’s bond market has opened in negative territory with nothing of relevance to drive trading this morning. Stocks are flat with the Dow nearly unchanged and the Nasdaq down 8 points. The bond market is currently down 5/32 (2.42%), which will likely push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point from yesterday’s morning pricing.
Today’s only item worth watching is the release of the minutes from the last FOMC meeting at 2:00 PM ET. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and how recent geopolitical events may impact the domestic and global economies. The goal is to form opinions about when Fed Chair Yellen and friends are likely to start raising key short-term interest rates. If there is a market reaction to them, it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.
Tomorrow actually has three reports that have the potential to influence mortgage rates. The first is at 8:30 AM ET when we will get last week’s unemployment figures. They are expected to show that 308,000 new claims for unemployment benefits were made last week, down from the previous week’s 311,000 initial claims. Rising claims indicate a weakening employment sector, so the higher the number, the better the news it is for bonds and mortgage rates. However, since this report tracks only a single week’s worth of initial claims, it usually takes a wide variance from forecasts for them to affect mortgage rates.
The week’s final two reports will be posted at 10:00 AM ET tomorrow. July’s Existing Home Sales is the first, coming from the National Association of Realtors. It will give us a measurement of housing sector strength and mortgage credit demand. It covers most home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show a small decline from June’s sales, meaning the housing sector weakened slightly last month. This would generally be good news for the bond market and mortgage rates because a strengthening housing sector makes broader economic growth more likely. However, unless the report shows a much stronger or weaker level of sales, it will likely have a minimal impact on mortgage pricing.
Tomorrow’s third report will come from the Conference Board, who is a New York-based business research group. They will post their Leading Economic Indicators (LEI) for July late morning also. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. A higher than expected reading is bad news for the bond market because it indicates that the economy may be strengthening more than thought. However, a weaker reading means that the economy may not grow as much as predicted, making stocks less appealing to investors. This also eases inflation concerns in the bond market and could lead to slightly lower mortgage rates tomorrow if the stock markets remain calm and the housing report shows no surprises. It is expected to show an increase of 0.7 % in the index, indicating moderate economic growth over the next couple of months. It will take a sizable difference between forecasts and its actual reading for this report to noticeably influence mortgage rates.