Thursday’s bond market has opened well in negative ground as yesterday’s afternoon weakness continues into this morning’s trading. A good portion of this morning’s bond selling is a result of stocks staging another rally during early trading. The Dow is currently up 255 points while the Nasdaq has gained 66 points. The bond market is currently down 20/32 (2.20%), which should mean another .125 of a discount point increase in this morning’s mortgage rates. Combined with yesterday’s post-FOMC weakness, we should see rates approximately .250 – .375 of a discount higher than yesterday’s morning pricing.
Both of this morning’s economic reports gave us unfavorable results, but neither was considered important enough to cause this morning’s bond selling. I believe today’s weak open is a result of last week’s flight-to-safety buying unwinding. This was mentioned as a concern last week and was a cause for concern for rates. As stocks rebound from the sell-off, those same funds that moved into bonds as stocks were falling now move out of bonds and back into stocks. The end result is higher bond yields and rising mortgage rates.
The first of today’s reports was last week’s unemployment numbers at 8:30 AM ET. They showed that 289,000 new claims for unemployment benefits were filed last week, down from the previous week’s revised total of 295,000 initial claims. Since this indicates the employment sector improved a little last week, we should consider this negative news for the bond and mortgage markets.
Also posted this morning was November’s Leading Economic Indicators (LEI). The Conference Board announced late this morning that their LEI rose 0.6% for last month, slightly exceeding forecasts of a 0.5% rise. Because this points towards stronger economic growth over the next several months, it is also slightly unfavorable news for mortgage rates.
Tomorrow has nothing of relevance scheduled for release, so we can expect stocks to be the biggest influence on mortgage rates again. If stocks continue to rise, we should see bonds move lower and mortgage rates increase again. I don’t believe we will see bond yields move higher as quickly as we have the past two days, but it is still highly recommended to keep an eye on the markets if still floating a rate because that could change at anytime.