Thursday’s bond market initially opened in negative territory but has since recovered those early losses. The stock markets are showing sizable gains with the Dow up 118 points and the Nasdaq up 31 points. The bond market is currently up 5/32 (1.85%), which should keep this morning’s mortgage rates at yesterday’s early levels. Some lenders did revise rates higher during afternoon trading, but this morning’s small gains should offset that adjustment.
Today’s sole piece of economic data was last week’s unemployment numbers at 8:30 AM ET. They revealed that 307,000 new claims for unemployment benefits were filed last week, down from the previous week’s revised total of 317,000. The declining number of claims indicates the employment sector was a bit stronger last week than the previous week. However, because analysts were expecting to see that 302,000 initial claims were made, the 307,000 hints of a weaker than thought sector and makes the data neutral for mortgage rates.
The European Central Bank (ECB) actually took center stage this morning with their announcement of a 1.2 trillion euro bond buying program (60 billion per month) in an attempt to boost economic growth and prevent price deflation there. This is similar to our QE programs of the past, the latest that ended late last year. There was some volatility in the global markets following the announcement, including here in the U.S. The net effect on today’s mortgage rates is favorable though because bonds appeared to be well in negative ground before the official announcement was made. Prior to it, it looked as if this morning was going to be a negative day for bonds with an increase in mortgage rates.
Tomorrow morning has two pieces of economic data that may possibly affect mortgage rates. Both reports are scheduled for release at 10:00 AM ET. The first is December’s Existing Home Sales from the National Association of Realtors. This data will give us a measurement of housing sector strength and mortgage demand by tracking home resales in the U.S. It is expected to show a rise in sales from November’s level, meaning the housing sector strengthened last month. Ideally, bond traders would like to see a decline in sales that would point toward housing sector weakness because a weakening housing sector makes broader economic growth more difficult. However, as long we don’t see a significant surprise in its results, it shouldn’t have a noticeable impact on Friday’s mortgage rates.
December’s Leading Economic Indicators (LEI) is the final report of the week. The Conference Board, who is a New York-based business research group compiles the data and releases this report. It attempts to predict economic activity over the next several months, but since it is posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Tomorrow’s release is expected to show a 0.5% increase, meaning the indicators are predicting an increase in economic activity this spring. As long as we don’t see a much stronger than predicted increase, I don’t think this data will have much of an influence on mortgage pricing.