Friday’s bond market has opened in positive territory following mixed economic news and early stock selling. The major stock indexes are showing sizable losses during early trading with the Dow down 114 points and the Nasdaq down 11 points. The bond market is currently up 12/32 (2.12%), which should improve this morning’s mortgage rates by approximately .250 of a discount point if comparing to Thursday’s early pricing.
Yesterday’s 30-year Bond auction went very well, helping to improve bonds again during afternoon trading, as we saw following Wednesday’s 10-year Note sale. After results were posted at 1:00 PM, the broader bond market reacted favorably and moved into positive ground. That led some lenders to improve mortgage pricing slightly while others may have waited for today’s economic data before reflecting that move.
There were two reports posted this morning that were relevant to mortgage rates. They gave us mixed results but the stock weakness is helping to keep the positive momentum in the bond market. November’s Producer Price Index (PPI) was the first of today’s economic reports. It was posted at 8:30 AM ET, revealing a 0.2% decline in the overall reading and no change in the core data. Both readings were 0.1% below expectations, meaning inflationary pressures at the producer level of the economy were softer than many had thought. That makes the data favorable for bonds and mortgage rates.
December’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment was posted just before 10:00 AM ET. It came in at a much stronger than expected 93.8. Analysts were calling for a reading of only 89.5, indicating surveyed consumers were much more optimistic about their own financial and employment situations than expected. By theory, that is bad news for the bond and mortgage markets because rising levels of confidence means consumers are more likely to fuel economic growth by making large purchases in the near future. However, it has not had too much of an impact on this morning’s rates.
Next week has a small handful of economic reports scheduled for release with only one of them considered to be highly important to the markets. Although, in addition to those reports, the last FOMC meeting of the year does take place and it will be followed by revised economic projections and a press conference with Fed Chair Yellen. There is a minor piece of data set for release Monday (Industrial Production), but I am expecting weekend news and stock prices to have the biggest influence on Monday’s mortgage rates. Look for details on next week’s activities in Sunday evening’s weekly preview.