Monday's bond market has opened in positive territory despite slightly stronger than expected economic data. The stock markets are relatively calm with the Dow and Nasdaq both down approximately 2 points. The bond market is currently up 12/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.
The Institute for Supply Management (ISM) kicked off this week's news with the release of their manufacturing index for November. They said it stood at 50.8, which was a slight decline from October's 50.9 but a little stronger than the 50.5 that was expected. This indicates that manufacturer sentiment was slightly stronger than expected. That is considered to be a negative for bonds, but so far ha snot had much of an impact on trading.
There is no relevant news scheduled for tomorrow, but Wednesday morning brings us the release of two reports to be concerned with. The first is the release of the revised 3rd Quarter Productivity report. This index is expected to show an upward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn't necessarily bad for the bond market. It is the conditions around economic growth, such as inflation that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 5.5%, up from the previous estimate of 4.9%.
The second report of the day will be October's Factory Orders. This report is similar to last week's Durable Goods Orders release except that this one includes orders for both durable and non-durable goods. This data usually isn't a major influence on bond trading, but we may see it cause some movement in mortgage rates if it varies greatly from forecasts. Analysts are expecting to see an increase of approximately 0.4%.
Overall, the most important day of the week is Friday with November's employment figures being posted, but we may also see movement in rates again Wednesday. Tomorrow and Thursday could be fairly quiet, assuming there are no major moves in the stock markets. Friday's data could cause a significant change in rates, so we may see pressure in bonds as investors prepare for its release. Accordingly, I am holding the lock recommendations for short and intermediate-term periods.
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