Monday’s bond market has opened in negative territory following mixed economic news to start the week. Stocks are showing minor losses with the Dow down 2 points and the Nasdaq down 19 points. The bond market is currently down 8/32 (2.15%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
April’s Personal Income and Outlays data was posted at 8:30 AM ET this morning, revealing a 0.4% increase in income and no change in spending. The income reading was slightly stronger than expectations (+0.3%), meaning consumers had more money to spend than thought. However, the good news is that the flat level of spending was weaker than analysts were expecting (+0.2%) and the variance was a little wider than the income difference. In other words, the variance in the good news was more than the bad news, so we can consider the data slightly favorable for mortgage rates.
The second report of the morning is one of the key reports of the week and the cause of today’s bond weakness. At 10:00 AM ET, the Institute for Supply Management (ISM) posted their manufacturing index for May. It came in at 52.8, exceeding forecasts of 51.9. This indicates that more surveyed manufacturers felt business improved during the month than did in April, pointing towards sector growth. That makes the data negative for bonds and mortgage rates and erased this morning’s early gains.
Tomorrow has one report that is likely to affect mortgage rates. It will come from the Commerce Department at 10:00 AM when they post April’s Factory Orders data. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much of a change in rates this month. Current forecasts are calling for no change from March’s level.
Overall, it appears that Friday is the key day of the week with regards to mortgage rate movement. However, Wednesday could also be an active day for mortgage pricing. As we have seen many times over the past couple weeks, we don’t necessarily have to have a significant event or economic report released for the bond market and mortgage rates to become volatile. Therefore, it would be prudent to continue to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.