Mel's Blog

Wednesday's bond market has opened in positive territory despite stronger than expected economic data. The stock markets are well into negative ground with the Dow down 82 points and the Nasdaq down 13 points. The bond market is currently up 16/32, which with yesterday's late gains should improve this morning's mortgage rates by approximately .500 of a discount point.

The Commerce Department gave us April's Factory Orders data this morning, revealing a 0.7% increase. This was stronger than expected, but a 1.0% downward revision to March's orders offset that surprise increase.

The Institute for Supply Management released its services index this morning also. It was expected to show a reading of 45.0, but came in at 44.0. This was not enough of a variance to influence bond trading or mortgage rates this morning.

Fed Chairman Bernanke spoke before a House Budget Committee this morning, but his prepared statement didn't reveal any significant surprises. He indicated that they expect the economy to begin to strengthen late this year, but there are factors such rising unemployment that may impact the recovery. Overall, nothing of significance that we had not heard before.

The revised 1st Quarter Productivity and Costs report will be released this morning along with last week's unemployment figures. This data measures employee output and employer costs for wages and benefits. It is considered to be a measurement of wage inflation. It is believed that the economy can grow with low inflationary pressures when productivity is high. Last month's preliminary reading revealed a 0.8% rate, but I don't think this piece of data will have much of an impact on the bond market or mortgage pricing unless it varies greatly from its forecasted revised reading of 1.2%.

The Labor Department is expected to say that 620,000 new claims for unemployment benefits were filed last week. With May's monthly figures coming Friday morning, any noticeable difference between forecasts and the actual number could create volatility in the markets as investors adjust their forecasts for Friday's release.

                   Mel