Monday’s bond market has opened the new year in negative territory despite slightly weaker than expected economic data. The stock markets are the cause of the bond weakness with the Dow up 124 points and the Nasdaq up 46 points. The bond market is currently down 12/32, which will likely push this morning’s mortgage rates higher than Friday’s pricing by approximately .125 - .250 of a discount point.
The Institute for Supply Management’s (ISM) manufacturing index was this morning’s only important economic data. It showed a reading of 57.0 that was slightly lower than the 57.3 that was expected. This means that manufacturer sentiment did increase last month, but not quite as much as thought. That basically can be considered goods for the bond market and mortgage rates, but it was the highest reading in 7 months. Therefore, the markets seem to be using the data to drive stock prices higher.
Tomorrow morning the Commer ce Department will post November’s Factory Orders data. This data gives us a fairly important measurement of manufacturing sector strength. It is similar to the Durable Goods Orders release that was posted late last week, except this report includes orders for both durable and non-durable goods. Durable goods are items that are expected to last three or more years such as electronics and autos. Examples of non-durable goods are food and clothing. Analysts are expecting to see a decline of 0.3% in new orders. This report generally does not have a huge impact on the bond market or mortgage rates, but it can influence bond trading enough to create a minor change in rates. The larger the decline, the better the news for mortgage rates.