Friday’s bond market has opened in positive territory even though this morning’s economic data gave us stronger than expected results. The stock markets are showing sizable losses despite that data, pushing the Dow lower by 109 points and the Nasdaq down 23 points. The bond market is currently up 7/32 (2.35%), which should improve this morning’s mortgage rates by approximately .250 – .375 of a discount point over Thursday’s morning pricing.
Today’s improvement in mortgage rates is much more a result of bond strength yesterday afternoon than it is about today’s early trading. Yesterday’s 30-year Bond auction went very well with many indicators pointing towards a strong level of interest from investors. Bonds had already improved from their morning levels yesterday when the auction results were posted at 1:00 PM ET, but they did extend those gains after. That led to many lenders improving rates during afternoon hours. The amount of the improvement you see in this morning’s rates will depend on how much of a downward revision was made late yesterday.
The Labor Department posted May’s Producer Price Index (PPI) at 8:30 AM ET, announcing a 0.5% increase in the overall reading and a 0.1% rise in the more important core data that excludes volatile food and energy prices. The overall reading was slightly stronger than the 0.4% that was forecasted but the core reading matched expectations. The higher overall reading makes the data slightly negative for bonds and mortgage rates, although it has not had much of an impact on today’s trading.
Also posted this morning was June’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment just before 10:00 AM ET. It came in at 94.6 that was well above the 91.4 that was predicted, meaning surveyed consumers were more optimistic about their own financial situations than many had thought. Because that could translate into higher levels of consumer spending, we should consider the news negative for mortgage rates.
Next week has only one highly important economic release in addition to a couple of moderately important reports. The big news of the week though will be the FOMC meeting, revised Fed economic forecasts and press conference in the middle of the week. There is relevant data set for release Monday (Industrial Production) that may have a minor impact on rates as the week starts. Look for details on next week’s calendar in Sunday evening’s weekly preview.