Friday’s bond market has opened well in positive territory despite mixed results from this morning’s economic data. The stock markets are looking to close the week on a negative note with sizable losses in the major indexes. This is helping to boost bond prices during morning trading. The Dow is currently down 236 points while the Nasdaq has lost 71 points. The bond market is currently up 20/32 (2.16%), which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point.
Yesterday’s 30-year Bond auction didn’t go as well as Wednesday’s 10-year Note sale did. The indicators we use to gauge investor demand for the securities showed a mediocre or average level of interest. The bond market moved lower after results were posted, cause some lenders to revise rates higher late yesterday. Therefore, the amount of the improvement in this morning’s rates depends if your lender made that adjustment yesterday afternoon or waited for today to reflect it.
There were three pieces of economic data posted this morning, two of which are considered to be important to the markets. The first was November’s Retail Sales report at 8:30 AM ET that showed retail-level sales rose 0.2% last month. This was slightly weaker than the 0.3% that was expected. However, a secondary reading that excludes more volatile and pricey auto transactions showed a 0.4% rise when analysts had forecasted 0.3%. That means we should consider the news neutral to slightly negative for bonds and mortgage rates.
Also posted early this morning was November’s Producer Price Index (PPI). It revealed a 0.3% rise in both the overall and core readings. Those were much higher than expectations of a 0.1% decline and 0.1% increase. The readings indicate that inflationary pressures at the producer level of the economy were stronger than thought. Because inflation erodes the value of a bond’s future fixed interest payments, the bond market usually reacts negatively to such news. To the benefit of mortgage shoppers, this morning’s news has been ignored for the most part.
The final report of the week was December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET. It came in at 91.8 that slightly exceeded forecasts of 91.6 but was still a decline from November’s 93.1. That means that surveyed consumers were less optimistic about their financial situations, so they are less likely to make a large purchase in the near future. We can consider this news good for mortgage rates.
Next week does not have a lot of economic data scheduled for release but we do have the last FOMC meeting of the year that is widely believed to bring the first Fed rate hike since 2006. The two-day FOMC meeting will also be followed by revised economic projections and a press conference with Fed Chair Yellen. There is nothing scheduled for Monday that is expected to affect mortgage rates. Look for details on next week’s events in Sunday evening’s weekly preview.