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Thursday’s bond market has opened in positive territory with stocks
relatively calm and no major economic data in tap today. The major stock
indexes are mixed with the Dow up 25 points and the Nasdaq down 3 points.
The bond market is currently up 9/32, which will likely improve this
morning’s mortgage rates by approximately .125 of a discount point.
Besides this morning’s economic news, we also have the Senate confirmation
hearing for Fed Chairman Bernanke’s replacement. Current Vice Chairman
Janet Yellen was nominated to fill Mr. Bernanke’s shoes when his current
term expires January 31, 2014. The hearing this morning likely isn’t going
to bring any significant surprises, especially since her prepared statement
was released yesterday. If something important enough to affect the markets
is said, it will come from the Q&A portion of the proceeding. Generally
speaking, Ms. Yellen is considered to be fairly accommodating in terms of
keeping stimulus programs in place and will likely prefer to start raising
key short-term interest rates later than sooner. In other words- bond
market friendly. Any comments made to contradict that theory is more likely
to negatively impact bonds and mortgage rates than a supporting statement
will improve rates, at least today.
The Labor Department gave us the first of this morning’s three pieces of
economic data. They announced that 339,000 new claims for unemployment
benefits were filed last week. This was higher than forecasts of 330,000
new claims. Also, the previous week’s total was revised upward from 336,000
to 341,000 initial claims, indicating the employment sector was weaker than
thought both weeks. Dissecting the data shows that analysts were expecting
to see new claims fall by 6,000 but actually only slipped 2,000 and that
was from a higher level of the previous week. That makes the data slightly
favorable to the bond market and mortgage rates because it hints at weaker
economic conditions.
September's Goods and Services Trade Balance was posted early this morning
also, revealing a $41.8 billion trade deficit during the month. That
exceeded forecasts of $39.1 billion, however, it was not enough of a
variance from a very minor report for the results to impact this morning’s
bond trading and mortgage pricing.
The final report of the morning was the 3rd Quarter Productivity reading.
It came in at a 1.9% annual rate, nearly matching forecasts of 2.0%. That
makes the headline reading neutral for the bond market although a secondary
reading that tracks labor costs showed a moderate decline when it was
expected to rise. (-0.6% vs +0.8%). That will allow us to treat the data as
slightly favorable for mortgage rates since weakening labor costs reduces
wage-inflation concerns in the markets.
Yesterday’s 10-year Treasury Note auction actually went pretty well with
several benchmarks we use to gauge investor demand showing a high level of
investor interest in the securities. That is good news and helped boost
prices in the broader bond market during afternoon trading yesterday and
contributed to an afternoon improvement in mortgage rates. It also helps us
to be optimistic about today’s 30year Bond auction. If we get similar
results from today’s sale, it is possible to see further improvements to
bond prices and mortgage pricing later today.
October's Industrial Production report is tomorrow’s only economic data
that is likely to affect mortgage rates. It will be posted at 9:15 AM ET,
giving us a measurement of manufacturing sector strength by tracking output
at U.S. factories, mines and utilities. It is expected to reveal a 0.1%
increase in production, indicating little strength in the manufacturing
sector. Stronger levels of production would be considered bad news for the
bond market and mortgage rates, but as with today’s data, this is not
expected to greatly influence the markets. Therefore, it will likely take a
sizable variance from forecasts for it to have a noticeable impact on
mortgage pricing.
If I were considering financing/refinancing a home, I would.... Lock if my
closing was taking place within 7 days... Lock if my closing was taking
place between 8 and 20 days... Lock if my closing was taking place between
21 and 60 days... Lock if my closing was taking place over 60 days from
now...
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