Tuesday’s bond market has opened in negative territory again as investors continue to book profits from the recent rally in bonds. The stock markets are showing modest gains with the Dow up 26 points and the Nasdaq up 5 points. The bond market is currently down 12/32, which will likely push this morning’s mortgage rates higher by approximately .250 – .375 of a discount point over yesterday’s morning pricing. A good portion of this morning’s increase comes from weakness late yesterday, so if your lenderrevised rates higher during afternoon hours Monday, you will not see nearly as much of an increase in today’s pricing.
There is no relevant economic data or other events scheduled today that are expected to influence mortgage rates. I would expect to see a fairly quiet day in the mortgage market unless stocks stage a rally or move well into negative ground. As long as the major indexes remain near current levels, mortgage rates should follow suit the rest of the day.
There are two events tomorrow that could affect mortgage rates, in addition to potential stock influences. The first is the revised 1st Quarter Productivity and Costs data at 8:30 AM ET. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation, which is relevant because it is believed that the economy can grow with low inflationary pressures when productivity is high. Economic growth isn’t much of a concern to the bond market at the moment, but if productivity is at a high level when the economy does turn the corner, inflation may not be as much of a topic as it would be without strong productivity levels. Last month’s preliminary reading revealed a 0.5% decline and analysts are expecting to see a 0.7% decline, but I don’t think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from that reading.
Tomorrow afternoon brings us the release of the Federal Reserve’s Beige Book. The report gets its name simply after the color of the binder it is presented in. The data in it details economic conditions throughout the U.S. by Federal Reserve region. It is relied upon heavily by the Fed to determine monetary policy during their FOMC meetings. If it shows surprisingly softer economic activity since the last report, the bond market may thrive and mortgage rates could drop shortly after the 2:00 PM ET release. If it reveals signs of inflation growing or rapidly expanding economic activity in many regions, we could seemortgage rates revise higher tomorrow afternoon. My guess is that this report is much more likely to help lower mortgage rates than it is likely to cause upward movement.
