Friday’s bond market has opened well in negative territory despite uneventful headline numbers in today’s economic reports. Stocks are contributing to the early bond selling with the Dow up 139 points and the Nasdaq up 46 points. The bond market is currently down 20/32 (2.10), but the increase in this morning’s mortgage rates should be limited to approximately .125 of a discount point due to strength late yesterday.
Neither of this morning’s economic reports gave us unfavorable results in their primary readings. The first was the University of Michigan’s revised Index of Consumer Sentiment for April. It showed a 95.9 reading, matching the preliminary estimate that was posted earlier this month. Analysts were expecting to see a 96.0 reading, so no surprise there. This means consumer confidence about their own financial and employment situations did not change over the month. With no strengthening or decline in confidence, we can consider the data neutral for mortgage rates.
The Institute for Supply Management (ISM) posted their manufacturing index late this morning also. This was the key report that was expected to boost bond prices and lower mortgage rates today. We did get what appears to be favorable news in the headline reading of 51.5. That matched March’s final reading, indicating that manufacturer sentiment did not improve or weaken last month. What makes it good news is the fact that analysts were calling for an increase. Therefore, the weaker number should be good news for mortgage rates. Unfortunately, some surprises in a couple of the components in the report, coupled with today’s strong stock gains, have prevented the heavy positive influence on bonds and mortgage rates that we expected.
Today’s bond reaction is disappointing to say the least. Since yields have moved higher against logic, we should go back to a cautious approach towards locking a rate if closing in the near future. With the benchmark 10-year Treasury Note yield still above 2.00%, it would be prudent to proceed carefully if still floating an rate. At least until the market stabilizes. The longer-term outlook has not changed, yet.
Next week does not have too many reports or other events scheduled that are expected to influence mortgage rates. Although, one of the reports is the almighty monthly Employment report next Friday. There is something set for Monday with the release of March’s Factory Orders report, but it is not considered to be a highly important piece of data. Look for details on it and the rest of the week’s calendar in Sunday evening’s weekly preview.