Friday’s bond market has opened in positive territory following mostly favorable economic data. The stock markets are showing pretty strong gains also with the Dow up 180 points and the Nasdaq up 42 points. The bond market is currently up 13/32 (1.93%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.
There were three pieces of economic news posted this morning, one of which is considered to be key data. The key report was the initial Gross Domestic Product (GDP) reading for the 4th quarter. It revealed that the economy grew at an annual rate of 0.7% during the last three months of the year. This was a little softer than the 0.9% that was expected, making the report good news for bonds and mortgage rates. Bonds tend to thrive in weaker economic conditions, so the softer reading makes mortgage-related bonds more attractive to investors.
The 4th Quarter Employment Cost Index (ECI) was also released at 8:30 AM ET. It showed a 0.6% rise, matching forecasts. Since this was a minor report that did not show a surprise in the results, it has been a non-factor in this morning’s bond trading and mortgage pricing.
Closing out the day’s activities and this week’s schedule was January’s revised reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET. It came in at 92.0, falling short of the 93.2 that was expected. That means surveyed consumers were less optimistic about their own financial conditions than thought and are less likely to make a large purchase in the near future. Because consumer spending makes up over two-thirds of our economy, we can consider this data favorable for bonds and mortgage rates.
Next week does not have a significant number of economic reports scheduled for release, but a good portion of what is being posted is considered to be highly important. There are two reports set for Monday- Personal Income and Outlays along with the ISM manufacturing index. Both can affect mortgage rates noticeably. Look for details on those releases and the rest of the week’s activities in Sunday evening’s weekly preview.