Monday’s bond market has opened fairly flat despite favorable data and a weak open in stocks. The major stock indexes are starting the week with sizable losses, pushing the Dow lower by 128 points and the Nasdaq down 19 points. The bond market is currently up 1/32 (1.89%), which should keep this morning’s mortgage rates at Friday’s levels.
Today’s only economic data was March’s New Home Sales numbers at 10:00 AM ET. The Commerce Department reported that sales of newly constructed homes fell 1.5% last month when analysts were expecting to see a small increase in sales. This news indicates the new home portion of the housing sector was softer than many had thought, making it good news for bonds and mortgage rates. However, this is a minor report that doesn’t draw too much attention, preventing it from helping mortgage rates this morning.
The rest of the week brings us the release of six more economic reports that may affect mortgage rates in addition to an FOMC meeting and a couple Treasury auctions. One those reports is considered to be extremely important to the financial and mortgage markets and can cause a great deal of volatility. Throw in the FOMC meeting and we have the makings of a highly important week, not only for mortgage rates but also for the broader financial markets.
Tomorrow has two of those reports scheduled, starting with March’s Durable Goods Orders at 8:30 AM ET. This important Commerce Department report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. These are products that are expected to last three or more years, such as appliances, electronics and airplanes. Current forecasts are calling for an increase in new orders of 1.7%. This would be a sign of manufacturing sector strength, but this data can be quite volatile from month-to-month. Therefore, a small variance between forecasts and the actual results will not heavily influence the markets or mortgage rates. A large decline would be considered good news for bonds and mortgage pricing, while a large rise would indicate strength in the sector. A sign of solid manufacturing growth could lead to higher mortgage rates tomorrow.
April’s Consumer Confidence Index (CCI) will also be posted tomorrow, but at 10:00 AM ET. This index is considered to be an indicator of future spending by consumers. The Conference Board surveys 5,000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to make large purchases in the near future. However, if they are concerned about issues such as job security and savings, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would keep inflation and economic growth to a minimum. On the other hand, a sizable increase could hurt the bond market, pushing mortgage rates higher tomorrow. It is expected to show a reading of 96.7, which would be an increase from March’s 96.2 reading. The lower the reading, the better the news it is for mortgage rates.
In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make government securities more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours.
Overall, I am expecting it to be a pretty active week for the markets and mortgage rates. We have several days that appear likely to be particularly volatile. Wednesday looks to be the best candidate for most important due to the FOMC meeting but Thursday’s GDP reading can easily be a market-mover. Tomorrow may be active also. Therefore, if still floating an interest rate and closing in the near future, I strongly recommend maintaining contact with your mortgage professional this week.