Tuesday’s bond market has opened in negative territory following stronger than expected results in both of this morning’s economic reports. The stock markets are showing minor losses with the Dow down 36 points and the Nasdaq down 4 points. The bond market is currently down 7/32 (2.51%), which should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point.
Both of this morning’s reports were considered moderately important and were posted at 10:00 AM ET. June’s Factory Orders showed a 1.1% jump in new orders for durable and non-durable products at U.S. factories. This was higher than the 0.5% that was expected, indicating that the manufacturing sector was stronger in June than many had thought. Because that is a sign of economic growth, it makes the data bad news for bonds and mortgage rates.
The Institute for Supply Management’s (ISM) Services Index for July wasn’t any better news. It came in at 58.7, exceeding forecasts of 56.5. This means their services sector members felt better about business conditions than they did in June, hinting at further economic growth. Therefore, we should consider the news negative for the bond market and mortgage rates.
I don’t see anything scheduled for tomorrow that is likely to affect mortgage rates. This means that we are likely to see stocks have the biggest influence on bond trading tomorrow. The benchmark 10-year Treasury Note yield is back above 2.50% this morning. If it closes above that level today, we should consider that a warning sign of possible further weakness to follow, leading to higher mortgage rates.