Thursday’s bond market has opened in positive territory following mixed economic data and another calm open in stocks. The Dow is currently up 2 points while the Nasdaq is up 13 points. The bond market is currently up 13/32 (2.21%), which should improve this morning’s mortgage rates slightly.
Yesterday’s afternoon release of the FOMC minutes did give us some important info that affected bond trading. The minutes gave the indication that the Fed is not likely to make their first rate hike at next month’s FOMC meeting. This wasn’t a complete surprise but it does help eliminate a little more doubt and also allowed bonds to recover ground lost between morning pricing and the 2:00 PM ET release. In other words, they helped prevent some lenders from issuing upward rate revisions.
There were three reports posted this morning with the first coming at 8:30 AM ET when last week’s unemployment figures were released. They revealed that 274,000 new claims for unemployment benefits were filed last week. This was higher than the 270,000 that was expected and an increase from the previous week’s 264,000, making the data good news for bonds and mortgage rates. Unfortunately, this is only a weekly report, so its impact on today’s trading has been minimal.
Next up was April’s Existing Home Sales report from the National Association of Realtors at 10:00 AM ET. They announced a 3.3% decline in home resales last month when analysts were expecting to see an increase. This means that the largest portion of the housing sector was softer than many had thought. Therefore, we can consider the data slightly positive for mortgage rates.
April’s Leading Economic Indicators (LEI) was the last report of the morning, also at 10:00 AM ET. The Conference Board said their LEI index rose 0.7% for April, exceeding forecasts of a 0.3% increase. Because the index attempts to predict economic activity over the next several months, the stronger than expected increase makes the data bad news for bonds and mortgage pricing.
Tomorrow has just April’s Consumer Price Index (CPI) at 8:30 AM ET, but it is the most important economic report of the week. This is the sister report of last week’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any significant surprises. Current forecasts are calling for a 0.1% increase in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two readings as it excludes more volatile food and energy prices. This data can also affect the Fed’s timeline for raising key short-term interest rates and will also help dictate mortgage rate direction.
Also worth noting about tomorrow is a speaking engagement by Fed Chair Janet Yellen at 1:00 PM ET. She will be speaking in Rhode Island and the topic is related to economic activity, so her words could cause volatility in the markets if she says anything surprising. Furthermore, the bond market will close at 2:00 PM ET tomorrow ahead of the Memorial Day weekend while stocks are open for a full day.