Tuesday’s bond market has opened in positive territory again after news of the Korean conflict raised fears of further instability in the world markets. The stock markets have reacted negatively with the Dow down 145 points and the Nasdaq down 33 points. The bond market is currently up 19/32, which should improve this morning’s mortgage rates by approximately .125 - .250 of a discount point.

There were two relevant economic reports posted this morning. The initial revision to the 3rd Quarter Gross Domestic Product (GDP) was the first, showing a 2.5% annual rate of economic growth during the third quarter. This was a little higher than forecasts and a fairly sizable increase from the previous estimate of 2.0%, meaning economic activity was stronger than many had thought. This is bad news for the bond market and mortgage rates because long-term securities such as mortgage-related bonds are more attractive to investors in a weak eco nomic and low inflation environment. Still, to the benefit of mortgage shoppers the Korean news is taking center stage, at least during morning trading.