Thursday’s bond market has opened has opened in positive territory following some favorable economic news. The stock markets are following suit with the Dow up 55 points and the Nasdaq up 23 points. The bond market is currently up 3/32 (2.10%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
Yesterday afternoon’s release of the Fed Beige Book didn’t reveal anything too surprising. All but one of the Fed districts reported stronger overall economic activity despite the winter storms. The report also indicated that inflation remained subdued. We did see some afternoon strength in bonds yesterday after morning pricing was issued, but it was not due to this report. The lack of a significant surprise in this release prevented a reaction to it in the mortgage market.
The first of this morning’s three reports was the revised Productivity index for the 4th Quarter at 8:30 AM ET. It showed a 2.2% decline in worker output that was softer than the initial estimate of down 1.8% but was slightly better than the -2.3% that was expected. This was a very minor variance in a low importance report, so it has had no impact on today’s mortgage rates.
Last week’s unemployment figures were also posted early this morning, revealing that 320,000 new claims for unemployment benefits were field last week. This was an increase from the previous week’s 313,000 and higher than the 295,000 that was forecasted. That indicates the employment sector was a little softer than many had thought last week, making the data favorable for bonds and mortgage rates. Unfortunately, this is only a weekly snapshot, so today’s rates have had only a slight reaction to the news.
January’s Factory Orders was the day’s last report, coming at 10:00 AM ET. The Commerce Department announced that new orders at U.S. factories slipped 0.2% when analysts were expecting to see a 0.6% rise. This is a sign that the manufacturing sector was weaker than predicted, so we can consider this slightly good news for the bond and mortgage markets also.
Tomorrow morning brings us the release of the almighty monthly Employment report. The Labor Department will release February’s Employment report at 8:30 AM ET tomorrow. Some of the important portions of the report will give us the unemployment rate, number of new jobs added or lost and the average hourly earnings reading. The best combination for the bond market and mortgage rates would be an increase in the unemployment rate, a much smaller increase in payrolls than expected and little or no increase in earnings. Current forecasts are calling for a 0.1% decline in the unemployment rate of 5.7% and approximately 240,000 new jobs added to the economy. Stronger than expected readings will likely fuel a stock market rally and selling in bonds that would cause a sizable upward revision to mortgage rates. On the other hand, disappointing numbers would raise concerns about the economy’s ability to continue to grow that would have an opposite impact on the markets and mortgage pricing.