By James Brooks

The bond market is currently down 16/32, which should lead to an increase in this morning's mortgage rates of approximately .125 - .250 of a discount point if comparing to Thursday's morning pricing.

The Institute for Supply Management (ISM) posted their manufacturing index for October late this morning, announcing a reading of 56.4. Not only was that higher than analysts were expecting (55.0), but it also was a small increase from September's 56.2. This means that surveyed manufacturing executives felt business was a little better this month than last month, surprising many who had thought the government shutdown was going to have a noticeable impact on sentiment and business conditions. That makes the data negative for the bond market and mortgage rates, especially since it somewhat supports the surprise jump in the related Chicago area report yesterday.

This morning's news and bond selling has pushed the yield on the benchmark 10-year Treasury Note to 2.60%. If we don't fall below this threshold today, the next level of support appears to be around 2.72%. Since mortgage rates tend to follow bond yields, that would translate into higher rates for mortgage shoppers. That is still a ways off from the recent high of 2.97%, but a move to that next level raises the possibility of that high being tested in the near future. A move today or Monday back below 2.60% would be a favorable signal that more improvements may be coming. However, in my opinion, the risk of floating versus the potential reward of a lower rate over the next week or so is titled well into the risk side. Therefore, I strongly recommend proceeding cautiously if still floating an interest rate.

Next week doesn't have a high number of economic reports scheduled for release but some of the data that is scheduled is considered extremely important to the financial and mortgage markets. We have the rescheduled releases of the initial GDP reading for the 3rd Quarter and October's Employment report late in the week. Both are considered key reports and are highly influential on financial markets and mortgage rates. Monday does have something moderately important for us to watch with the release of Factory Orders for August and September.