Wednesday’s bond market has opened in positive territory despite unfavorable economic news. Another round of heavy stock selling is helping to boost bonds during early trading. The Dow is now down 226 points while the Nasdaq has lost 51 points. The bond market is currently up 13/32 (2.19%), which should improve this morning’s mortgage rates by approximately .125 -.250 of a discount point.
The ADP Employment report for December at 8:15 AM ET kicked off today’s fairly busy schedule. It showed that 257,000 new private sector jobs were added last month, greatly exceeding forecasts of 190,000. This is clearly bad news for the bond market and mortgage rates because by theory, that number indicates the monthly report later this week is likely to show stronger numbers also. Fortunately, stock losses and concerns about geopolitical and financial issues have allowed the markets to ignore the data.
Also posted this morning was November’s Factory Orders report. The Commerce Department announced at 10:00 AM ET that new orders for durable and non-durable goods slipped 0.2% in November. That matched forecasts, so it has had no impact on today’s bond trading or mortgage pricing.
We also have the minutes from the last FOMC meeting to deal with this afternoon. They will give market participants insight to the Fed’s thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what the minutes show. They will be released at 2:00 PM ET, so if there is a reaction it will come during mid-afternoon trading. The last FOMC meeting was followed by revised Fed forecasts and a press conference by Fed Chair Janet Yellen, so the possibility of seeing something unexpected is minimal. Still, market participants will be looking for any tidbits about the decision to raise key short-term interest rates and when the next move may be made.
Tomorrow has only a single minor piece of data scheduled for release. At 8:30 AM ET we will get last week’s unemployment numbers. They are expected to show that 270,000 new claims for unemployment benefits were filed last week. The previous week had 287,000 initial claims, so analysts are expecting to see a decent decline. Ideally, we would like to see a sizable increase in new claims, indicating employment sector softness. The higher the number of new claims, the better the news it is for mortgage rates. However, since this is only a weekly report, it usually takes a wide variance from forecasts for this data to affect mortgage pricing.