Thursday’s bond market has opened down slightly despite favorable economic news. The stock markets are showing moderate losses of 60 points in the Dow and 6 points in the Nasdaq. The bond market is currently down 2/32 (1.88%), but due to strength late yesterday, we still may see a slight improvement in this morning’s mortgage rates if comparing to yesterday’s early pricing.
The first of this morning’s two relevant reports was February’s Durable Goods Orders at 8:30 AM ET. The Commerce Department announced a 2.8% decline in new factory orders for big-ticket products that have a life expectancy of 3 or more years. This was very close to the 2.9% decline that was expected. Since this data is known to be volatile from month to month, that difference from expectations had no impact on today’s rates. But a secondary reading that strips out more costly and volatile transportation-related orders such as new airplanes, showed a 1.0% drop when analysts were calling for only a 0.2% decrease. That variance is what allows us to consider the data good news for mortgage rates, even though it is not showing in this morning’s trading.
Also posted early this morning was last week’s unemployment figures. They revealed that 265,000 new claims for unemployment benefits were filed last week. This was a little short of the 268,000 that was predicted, but a downward revision to the previous week’s number of initial claims (from 265k to 259k) means we saw an increase last week. Because this is only a weekly snapshot, many analysts and market participants don’t put too much weight into the figures. You could make an argument that the increase is good news for bonds and mortgage rates, while the other side of the argument is that the number of claims fell short of forecasts so the data is bad news. Either way, we haven’t seen the markets have much of a reaction to the data.
The bond market is set to close at 2:00 PM ET today ahead of tomorrow’s Good Friday holiday. The stock and bond markets will be closed all day tomorrow and will reopen for regular trading Monday. It is common to see some pressure in bonds as investors make moves to protect themselves over the long holiday, so don’t be surprised if bonds weaken as the day progresses.
Despite the markets being closed tomorrow, there is a somewhat relevant piece of data being released. It is the final revision to the 4th Quarter GDP at 8:30 AM ET. This is the second and final revision to January’s preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. The GDP is the benchmark measurement of economic activity. It is expected to show that the economy grew at an annual pace of 1.0% last quarter, unchanged from the previous estimate that was released last month. Analysts are now more concerned with next month’s preliminary reading of the 1st quarter than data from three to six months ago. Because the markets are closed, we won’t see a reaction to this report until they reopen next Monday.