Wednesday’s bond market has opened in negative territory despite more favorable economic news. The stock markets are contributing with the Dow up 103 points and the Nasdaq up 28 points. The bond market is currently down 7/32 (2.29%), but due to strength late yesterday we still should see a slight improvement in today’s mortgage rates if comparing to yesterday’s morning pricing.
October’s Housing Starts was this morning’s only economic data. It showed an 11.0% decline in new home groundbreakings. That was significantly softer than analysts were expecting and indicates weakness in the new home portion of the housing sector. That is certainly good news for bonds and mortgage rates. However, this is not a highly influential report and unable to offset a general negative tone in this morning’s trading.
We also have the minutes from the last FOMC meeting later today. Traders will be looking for any indication of the Fed’s next move regarding monetary policy, particularly when the first rate increase will come. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising regarding when the Fed will raise key short-term interest rates, we will see some movement in rates this afternoon.
Tomorrow morning has two minor pieces of economic data set for release. The first will be last week’s unemployment figures at 8:30 AM ET. They are expected to show that 272,000 new claims for benefits were filed, done from 276,000 of the previous week. Ideally, we want to see a large increase in initial claims, indicating employment sector weakness. The higher the number of claims, the better the news it is for mortgage rates. It is worth noting though that this is only a weekly snapshot, so I am not expecting it to have much of an impact on tomorrow’s mortgage pricing.
The final report of the week will come from the Conference Board at 10:00 AM ET tomorrow, when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.5% increase, meaning economic activity will likely rise fairly quickly over the next couple of months. Generally speaking, this would be bad news for bonds. But since this data is considered only moderately important, its results need to miss forecasts by a wide margin from forecasts for it to affect mortgage rates.