Mel's Blog

Thursday's bond market has opened fairly strong, recovering a good part of yesterday's late sell-off. The stock markets opened in positive territory, appearing to follow the same pattern as bonds. The Dow is now up 103 points and the Nasdaq up 20 points. The bond market is currently up 34/32.

This morning's economic data wasn't exactly favorable to bonds, but fortunately it has not heavily influenced trading. The Commerce Department reported an increase in April's Durable Goods Orders of 1.9%. This was much stronger than forecasts and indicates that manufacturing activity for big-ticket products may be stronger than expected. That is considered negative news for bonds because rising manufacturing activity points towards an expanding economy.

April's New Home Sales data was also posted this morning, showing that there was little change from March's sales figures. Analysts were expecting to see a small increase in sales, but since this data is not considered to be of high importance, the slight difference between forecasts and the actual sales total was not enough to impact mortgage pricing.

The Labor Department said that 623,000 new claims for unemployment benefits were filed last week. This was a smaller number than was expected, but since this tracks only a week's worth of claims its influence on trading and mortgage rates has been minimal.

Today's 7-year Treasury Note auction may influence bond trading and possibly mortgage rates later today. Yesterday's 5-year sale was met with a respectable demand, so hopefully today's sale will also go well. Results will be posted at 1:00 PM ET, so any reaction will come during afternoon hours.

The first of two revisions to the 1st quarter Gross Domestic Product (GDP) will be released at 8:30 AM tomorrow. The second revision to this report comes next month but isn't expected to have much of an impact on the financial markets. The GDP is the sum of all goods and services produced in the U.S., and is considered to be the best indicator of economic growth. Last month's preliminary reading revealed a 6.1% decline in the annual rate of growth. Analysts expect an upward revision to this reading with the consensus being a 5.5% decline. If the upward revision is stronger than expected, we may see the bond market react negatively and mortgage rates move higher.

The second report of the day and the last important data of the week will come from the University of Michigan who will update their Index of Consumer Sentiment for May. It is forecasted to show little change from this month's preliminary reading of 67.9. An upward revision would be considered a negative for bonds.

                   Mel