Thursday’s bond market opened up slightly despite unfavorable economic data and early stocks gains. The major stock indexes are showing moderate improvements with the Dow up 52 points and the Nasdaq up 18 points. The bond market is currently up 3/32 (2.46%), but we probably will not see much of a change in this morning’s mortgage rates due to some weakness in trading late yesterday.
Yesterday’s trading pattern helped support the theory that 2.44% is a pretty strong level of resistance in the benchmark 10-year Treasury Note yield. I don’t think it will remain between 2.44% and 2.50% much longer, meaning we are likely to see a move one way or another very soon. It is my opinion that we will see a move above 2.50% (bad for rates) or a rally to break below 2.44% (lower mortgage rates) in the immediate future. The risk of the upward move is much stronger than the likelihood of a downward move in my opinion, without some type of unexpected driving factor. Therefore, please proceed cautiously if still floating an interest rate and closing in the near future.
Last week’s unemployment figures were posted early this morning. They showed that 289,000 new claims for unemployment benefits were made last week, down from the previous week’s revised total of 303,000 initial claims. This means that the employment sector strengthened last week, making the data negative for the bond and mortgage markets. Fortunately though, this is only a weekly report, limiting its impact on this morning’s pricing.
Tomorrow has one report that has the potential to affect mortgage rates. That would be Employee Productivity and Costs data for the second quarter at 8:30 AM ET tomorrow morning. It will give us an indication of employee output per hour. High levels of productivity are believed to allow the economy to grow without fears of inflation. I don’t see this being a big mover of mortgage rates either, but it may influence rates slightly during morning trading. Analysts have predicted a 1.4% increase in productivity during the second quarter and a 1.8% rise in labor costs. A larger increase in the productivity reading and a smaller than expected rise in costs could help improve bonds, contributing to slightly lower mortgage rates tomorrow.