Todays Commentary

Updated on April 19, 2018 10:42:40 AM EDT
Thursday’s bond market has opened well in negative territory as the overall negative tone in bonds continues, pushing yields to a concerning level. The major stock indexes aren’t the cause this morning with the Dow down 30 points and the Nasdaq down 39 points. The bond market is currently down 11/32 (2.91%), which should push this morning’s mortgage rates higher by approximately .250 of a discount point of comparing to Wednesday’s early pricing.

Yesterday’s afternoon release of the Fed Beige Book didn’t reveal much of a surprise about current economic conditions. It showed that economic activity strengthened moderately since the last update but there were concerns regarding what impact the current and possible future trade tariffs may have on that growth. The stock market initially reacted negatively to that news. However, bonds had little reaction after the report was posted at 2:00 PM ET. They had already moved lower by the time the report was released.

There were two minor pieces of data released this morning. Last week’s unemployment figures were posted at 8:30 AM ET. They showed that 232,000 new claims for unemployment benefits were filed last week, down slightly from the previous week’s 233,000 initial filings. Analysts were expecting to see a lower number in this week’s update. Because rising claims hints at a weakening employment sector, the higher number than expected is favorable news for bonds and mortgage pricing. Unfortunately in this case, this is only a weekly snapshot and the variance from forecasts was fairly minor. That has prevented much of a reaction in the bond and mortgage markets this morning.

Today’s second report came from the Conference Board, who announced that their Leading Economic Indicators (LEI) for March rose 0.3%, falling just short of the 0.4% increase that was expected. This data attempts to predict economic activity over the next three to six months, so the softer increase is favorable for mortgage rates. However, this data isn’t important enough to offset the negative tone this week.

Tomorrow has nothing scheduled that is expected to influence mortgage rates. Hopefully the recent selling will subside because the benchmark 10-year Treasury Note yield is right at an important resistance level. This is the upper end of a pretty strong range (2.80 – 2.91%) that if broken, could lead to another upward move in yields and mortgage rates. Ideally, we want to see this level hold and yields move back into the mid 2.8’s very soon.

 ©Mortgage Commentary 2018
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