Mortgage Rate UPDATE

Mortgage and Lending with Southwest Funding

Tuesday’s bond market has opened in negative territory, but with minor losses. The stock markets are showing minor gains despite the government shutdown that took effect last night. The Dow is currently up 8 points while the Nasdaq is up 17 points. The bond market is currently down 5/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

The Institute for Supply Management (ISM) posted their manufacturing index for September at 10:00 AM ET this morning, announcing a reading of 56.2. This was an increase from August’s reading when analysts were expecting to see a small decline. That means more surveyed executives felt business improved during the month than many had thought, making the data negative for the bond market and mortgage rates since it hints at a growing manufacturing sector.

Tomorrow's only scheduled economic data is August's Factory Orders at 10:00 AM ET. However, it appears that we will not get this data since it comes from the Commerce Department, who is a governmental agency. The Institute for Supply Management is a private-sector group, so it is unaffected by the government shutdown. Tomorrow’s data is not a big issue, but missing Friday’s monthly Employment report that is considered key data is a significant matter. That data is considered one of the most important pieces of economic data we see each month, so missing it is certainly newsworthy and the markets will be looking for it as soon as the government reopens for business.

The Factory Orders report that was scheduled for tomorrow is a manufacturing sector release that is similar to last week's Durable Goods Orders, but also includes orders for non-durable goods. It can impact the bond market enough to slightly change mortgage rates if it varies from forecasts by a wide margin. Analysts are forecasting a 0.3% increase in new orders, meaning manufacturing activity grew slightly in August. Good news for the bond market and mortgage pricing would be a sizable decline in orders, but we will not get the data until the shutdown comes to an end.

We are seeing somewhat of a muted response in the financial and mortgage markets to the stalemate and shutdown. Maybe the general consensus is that this is only temporary and will be resolved before we get to the point that we cannot pay our bills in a couple weeks. There may be more to come if this drags on longer than a couple days, especially if we get closer to the October 17 date, when the government will run out of money to pay current bills and interest payments if the debt ceiling is not raised. In other words, this might just be the calm before the storm, hoping that Washington is able to resolve the matter quickly.