Thursday’s bond market has opened flat despite a weaker than expected economic report. The stock markets opened in negative territory but have since improved off their earlier lows. The Dow is currently down 9 points while the Nasdaq has lost only 7 points. The bond market is currently unchanged from yesterday’s close, but we will still may see a slight improvement in this morning’s mortgage pricing due to strength late yesterday.
Yesterday’s afternoon release of the minutes from the last FOMC meeting didn’t reveal any major surprises but did indicate that there is concern about the economy and fiscal issues late next year. They hinted that the Fed may be prepared to do something to help boost economic growth if the economy does not pick up momentum on its own. The leading ideas are a QE3 program or extending the current campaign of swapping short-term holdings to long-term debt, known as Operation Twist. The renewed optimism about more stimulus coming from the Fed helped boost bond prices late yesterday and caused some lenders to slightly improve mortgage rates.
There were two pieces of economic data posted this morning. The first came from the Labor Department, who announced that 370,000 new claims for unemployment benefits were filed last week. This matched the previous week’s revised total, meaning there was no change from two weeks ago to last week. Analysts were expecting to see a slightdecline in new claims, so we could technically consider this data a bit favorable for bonds and mortgage rates. But, the truth is that it doesn’t carry enough significance to influence trading or rates with such a minor variance. Therefore, we are considering the data to be neutral and a non-factor in today’s pricing.
The second of the morning and the final report of the week was April’s Leading Economic Indicators (LEI). The Conference Board said late this morning that the LEI fell 0.1% last month when it was expected to rise 0.2%. This means the index is predicting flat economic growth over the next several months. That makes the results good news formortgage rates, but unfortunately this data is also considered moderately important so its impact on today’s bond trading and mortgage pricing has been minimal.
There is nothing of relevance scheduled for release tomorrow, so look for the stock markets and news from Greece to be the biggest factors in changes to mortgage pricing tomorrow. Stock gains will likely translate into bond weakness and higher mortgagerates, while stock losses should lead to an improvement to rates. Any progress in the Greece political stalemate will also influence the markets, particularly if something gives that indicates the current bailout agreement in place will be honored. That would probably fuel a stock rally and bond selling, meaning mortgage rates could move higher.
