Thursday’s bond market has opened fairly flat as investors await tomorrow’s major data. The stock markets are also calm with the Dow up 19 points and the Nasdaq up 11 points. The bond market is currently down 1/32 (1.83%), which should keep this morning’s mortgage rates close to yesterday’s morning levels. Some lenders may show a slight improvement based on strength late yesterday, but the change should be minimal.
Yesterday’s 7-year Treasury Note auction went pretty well, helping to boost bond prices during afternoon trading. Several benchmarks used to gauge investor demand for the securities showed strong levels of interest. This was better than Tuesday’s 5-year auction and helped the broader bond market to move higher after results were posted at 1:00 PM ET.
Last week’s unemployment figures were posted at 8:30 AM ET this morning, revealing 276,000 new claims filed for unemployment benefits. This was an increase from the previous week’s 265,000 initial claims and was higher than what forecasts were calling for (no change). The news is considered good for bonds and mortgage rates because rising claims indicate a softening employment sector. However, since this is only a weekly snapshot its results often have little impact on mortgage rates. That is the case this morning unfortunately.
We have some highly important data coming tomorrow that should make the day pretty volatile. The biggest news of the week will come at 8:30 AM ET when the Labor Department posts March’s Employment report. This release will reveal the U.S. unemployment rate and the number of jobs added or lost during the month in addition to average earnings increase or decline. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 4.9% and that approximately 200,000 payrolls were added to the economy during the month while earnings rose 0.3%. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and could likely push mortgage rates lower tomorrow morning because it would indicate weaker than thought conditions in the employment sector of the economy.
Tomorrow’s second report comes from the University of Michigan just before 10:00 AM ET. Their revised March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers’ willingness to spend. Rising confidence is considered bad news for the bond market and mortgage pricing because it usually means consumers are more willing to spend. Tomorrow’s report is expected to show a reading of 90.5, up from the preliminary reading of 90.0. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.
The final report of the week is the other highly important one and comes at 10:00 AM ET. That is when the Institute for Supply Management (ISM) will release their manufacturing index. This index gives us an important measurement of manufacturer sentiment by surveying manufacturing executives. It is the first piece of data that we see each month that covers the preceding month. In other words, it is the freshest economic data each month. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened. This month’s report is expected to show a reading of 50.6, which would be an increase from February’s reading of 49.5. This means that analysts think business sentiment rose from last month’s level. That would be relatively bad news for the bond market and mortgage rates because rising confidence means a stronger manufacturing sector. The higher the reading, the worse news it is for bonds and mortgage rates.