Tuesday’s bond market has opened in negative territory following some surprisingly strong housing news. The stock markets are relatively calm with the Dow up 14 points and the Nasdaq nearly unchanged from yesterday’s close. The bond market is currently down 11/32 (2.27%), which should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point over Monday’s morning pricing.
Today’s only data was April’s Housing Starts that showed a 20.2% spike in new home construction groundbreakings. That jump brought starts to their strongest level since November 2007, indicating solid strength in the new home portion of the housing sector. The increase was much stronger than analysts were expecting, so the data is clearly negative for the bond and mortgage markets.
There is nothing scheduled for release tomorrow morning that is likely to affect mortgage rates. However, we do have the minutes of the last FOMC meeting being released tomorrow afternoon. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation or concerns about economic growth. The goal is to form opinions about the Fed’s next move regarding interest rates, which is expected to happen sometime this year. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading.
It is worth reminding that we have an early close in the bond market Friday ahead of the Memorial Day holiday Monday. That early close follows a key inflation reading Friday morning. With none of Thursday’s releases considered to be highly important, I would not be surprised to see a fairly active bond market as we head towards the end of the week as traders look to protect themselves over the long weekend. This raises the possibility of seeing intraday revisions to mortgage rates the next couple days.