July 10th, 2008 4:33 PM by Lehel Szucs
Thursday's bond market has opened down slightly following unfavorable results in today's only economic news. The stock markets are mixed with the Dow down 5 points and the Nasdaq up 4 points. The bond market is currently down 4/32, which should keep this morning's mortgage rates near yesterday's levels.
The Labor Department reported this morning that new claims for unemployment benefits fell sharply last week. They said that 346,000 new claims were filed last week. This was well below the 395,000 that was expected and a drop of 58,000 claims from the previous week. That is good news for the economy, meaning its negative news for bonds and mortgage rates. Fortunately though, this data only tracks a week's worth of claims and is not usually considered to be of high importance to the markets.
There is a Treasury auction of 10-year inflation protected notes (TIPS). It likely will not have an impact on rates, but could influence bond trading slightly if it is met with a strong or weak demand from investors. In a very light week of economic news such as this week is, events like these sometimes have a greater impact on the markets than if they took place during a busy week of news.
Both of the week's monthly economic reports are scheduled to be posted tomorrow morning. The first is May's Goods and Services Trade Balance report at 8:30 Am ET, which measures the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market and will not likely have an impact on mortgage rates. However, if it does vary greatly from analysts' forecasts of a $62.2 billion deficit, we may see some movement in bond prices, but probably not enough to cause much change in mortgage rates.
The second is the University of Michigan's Index of Consumer Sentiment that is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary read ing for July will be posted late tomorrow morning and is expected to fall from June's final reading of 56.4 to 55.5. This would indicate that consumers were less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more apt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these.
©Mortgage Commentary 2008