Mortgage rates

Thursday’s bond market has opened in positive territory due mostly to a negative tone in stocks. The major stock indexes are extending yesterday’s afternoon selling that pushed the Dow lower by 108 points, to close below 14,000 again. The Dow is currently down 52 points while the Nasdaq has lost 19 points. The bond market is currently up 10/32, which with yesterday’s late strength should improve this morning’s mortgage rates by approximately .250 of a discount point.

The minutes from the last FOMC meeting that were posted yesterday afternoon did show some serious discussion about possibly easing the Fed’s current bond buying program earlier than previously estimated. While that is actually negative news for the bond market and mortgage rates because it is mortgage-related bonds that the Fed is currently buying, the possible removal of a stimulus campaign raised questions in the stock market about the pace of economic growth if they do alter the program. That led to stocks turning south and as a result, bonds benefited as funds shifted into the longer-term securities. With no major surprises in this morning’s economic data, the negative tone in stocks has extended into this morning’s trading, as has the bond buying.

There were four pieces of economic data posted this morning. The first and most important of them was January's Consumer Price Index (CPI) from the Labor Department at 8:30 AM ET. They announced that the overall index was unchanged from December’s reading and that the core data rose 0.3%. The overall reading was slightly lower than the 0.1% increase that was expected, but the core reading exceeded forecasts of a 0.2% rise. That makes the data neutral to slightly negative for the bond market and mortgage rates since it hints that core inflationary pressures were a little stronger than thought at the consumer level of the economy.

The Labor Department also announced early this morning that 362,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 342,000. This is a decent sized increase and a slightly larger increase than was expected, hinting that the employment sector was a little weaker than many had thought last week. That makes the data favorable for the bond market and mortgage rates, but it was a small variance from forecasts in a report that is considered to be of fairly low importance to the markets due to its small coverage period. Therefore, it has had little impact on this morning’s mortgage pricing.

January's Existing Home Sales report was released late this morning. The National Association of Realtors announced that home resales rose slightly last month from December’s revised sales. Since analysts were expecting to see a very minor decline, we could label this data slightly negative for mortgage rates. However, the difference between forecasts and actual sales was so minor that the markets barely reacted to the data at all.

And finally, the Conference Board said late this morning that their Leading Economic Indicators (LEI) rose 0.2% last month. This was just below the 0.3% that was forecasted, indicating that economic activity may expand just a bit over the next several months. Again, a small miss in a minor economic report, so the data has not influenced this morning’s bond trading or mortgage rates.





Tomorrow has nothing of relevance scheduled for release. Look for the stock markets to drive bond trading and mortgage rate movement again. If stocks extend their losses, pushing the Dow farther away from 14,000, bonds should gain more ground. This is particularly good news for mortgage rates since the benchmark 10-year Treasury Note is now below 2.00% again.