Tuesday, February 1, 2011

Market UpDate W/ an Increase in Mortgage Rates

Tuesday’s bond market is in negative territory following early stock gains and stronger than expected results from an important economic report. The Dow is currently up 89 points while the Nasdaq has 37 points. The bond market is currently down 19/32, which will likely push this morning’s mortgage rates higher by approximately .250 of a discount point.

The Institute of Supply Management (ISM) released their manufacturing index for January late this morning. They announced a reading of 60.8 that exceeded forecasts of 57.5 and that December’s reading was revised higher by 1.5 points. This indicates that more surveyed manufacturers felt business improved during the month than did last month- a sign of a strengthening manufacturing sector and economic growth. That means this data is negative for bonds and mortgage rates because economic growth makes long-term securities such as mortgage related bonds less attractive to investors.
Tomorrow has no government reports scheduled for release or data that is considered likely to impact mortgage rates. However, there are a couple of private sector employment-related reports due to be posted. They normally would not be of much concern, but one of them showed an unexpected spike in new hires recently that caused selling in bonds and an increase in mortgage rates. I still am not too concerned about their results, but the potential does exist that a significant variance in the numbers could lead to changes in mortgage pricing.

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