Thursday’s bond market has opened in positive territory following the release of mixed economic news. The stock markets are showing another round of gains with the Dow up 40 points and the Nasdaq up 16 points. The bond market is currently up 4/32, but we will still likely see a slight increase in this morning’s mortgage rates as a result of weakness late yeste rday.

Yesterday’s FOMC minutes led to additional weakness in bonds after their release indicated that Fed members are still concerned about inflation. There was actually discussion of a half-point rate increase at the last meeting before voting for another quarter-point. This raised inflation concerns and caused bonds to drop during afternoon trading.

The first piece of data released this morning was the revised 1st Quarter Productivity and Costs report. It showed an increase of 3.7% compared to the 3.2% that was previously announced. However, analysts were expecting to see a 3.9% annual pace. This can be considered a negative for bonds, but hasn’t had much of an impact on trading.



The second piece of data was weekly unemployment claims that showed an increase in new claims. The 336,000 claims were higher than expected, which is good news for bonds. Unfortunately, the bond market doesn’t put much weight in this data since it covers only a w eek.

The second important report of the day was the release of the Institute for Supply Management’s (ISM) manufacturing index for May. It revealed a reading of 54.4, falling short of analysts’ forecasts of a 55.7 reading. This means that fewer manufacturers felt business improved during the month than did in April. This is good news for bonds and mortgage rates and helped push bonds into positive territory this morning.

The week’s most important piece of economic data is also arguably the single most important report that we see each month. The Labor Department will post May’s Employment data early tomorrow morning. This report gives us key employment readings such as the U.S. unemployment rate and the number of jobs added or lost during the month. Analysts are expecting to see the unemployment rate remain at 4.7% with approximately 170,000 new jobs added. An increase in unemployment and fewer new jobs than expected would be great news for the bond market. I t would probably create a sizable rally in bonds, leading to lower mortgage rates tomorrow.

The Commerce Department will release the last report of the week with April’s Factory Orders data late tomorrow morning. This manufacturing sector report is similar to last week’s Durable Goods Orders release, but also includes orders for non-durable goods. It can cause some movement in the financial markets if it varies from forecasts by a wide margin, but it isn’t expected to cause much change in rates this month. Current forecasts are expecting to see a drop in orders of 2.1%. With the Employment report being released tomorrow, I don’t see this data having much influence on bond trading or mortgage rates.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was ta king place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

a la mode

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