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Tuesday’s bond market has opened in positive territory following early stock weakness and favorable economic news. The major stock indexes are showing losses during early trading with the Dow down 56 points and the Nasdaq down 7 points. The bond market is currently up 7/32, which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point.
The Conference Board gave us today’s only relevant economic data late this morning with the release of September’s Consumer Confidence Index (CCI). They announced a reading of 79.7 that was just shy of the 80.0 that was forecasted. This means that surveyed consumers were just a little less optimistic about their own financial and employment situations than analysts thought. That makes the data good news for the bond market and mortgage rates, particularly so because it was a decline from August’s reading. Waning confidence usually means consumers are less likely to make a large purchase in the near future, helping to limit economic growth.
Tomorrow morning has two pieces of economic data that may influence mortgage rates. The first is August’s Durable Goods Orders at 8:30 AM ET. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Big-ticket products are items that are expected to last three or more years such as electronics and appliances. Analysts are expecting to see an increase of 0.5% in new orders, indicating minor growth in the manufacturing sector. A sizable decline could help boost bond prices and cause mortgage rates to drop tomorrow because signs of economic weakness make longer-term securities more appealing to investors. However, a sizable increase would indicate a stronger than expected manufacturing sector and would likely help push mortgage rates higher. It is worth noting that this data is known to be quite volatile from month-to-month, so a slight or moderate change may not affect mortgage pricing.
August’s New Home Sales will be released late tomorrow morning. The Commerce Department is expected to say that sales of newly constructed homes rose last month, indicating housing sector strength. This report will likely not have a noticeable impact on mortgage rates unless its readings differ greatly from forecasts. This is the week’s least important report in terms of potential impact on mortgage rates, partly because it covers only the small portion of all homes sales that last week’s Existing Home Sales report did not.
Also tomorrow is the first of this week’s two Treasury auctions that can affect mortgage rates. The Treasury will sell 5-year Notes tomorrow and 7-year Notes Thursday, which will tell us if there is an appetite for medium-term securities. If investor demand in these sales is strong, particularly from international buyers, the broader bond market should move higher, pushing mortgage rates lower. But a lackluster interest from investors could lead to bond selling and higher mortgage pricing. The results of the sales will be announced at 1:00 PM ET each day, so any reaction to the results will come during afternoon trading tomorrow and Thursday.