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Wednesday’s bond market has opened in negative territory despite early weakness in stocks. The major stock indexes are showing moderate losses during early trading. The Dow is currently down 51 points to remain below 16,000 while the Nasdaq has lost 18 points. The bond market is currently down 8/32, but due to additional gains during late trading yesterday, we should see little change in this morning’s mortgage rates if comparing to Tuesday’s early pricing. This morning’s early weakness more or less offset yesterday’s late strength.
As has been the case thus far this week, there is no economic data relevant to mortgage rates scheduled to be posted today. We do have the first of this week’s two Treasury auctions that have the potential to influence mortgage pricing though. 10-year Treasury Notes are being sold today while 30-year Bonds will be auctioned tomorrow. Today’s auction is a little more important than tomorrow’s will be and is likely to have a bigger influence on mortgage rates. Results of the sales will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, particularly international buyers, we should see strength in the broader bond market and improvements to mortgage pricing during afternoon hours. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates after results are posted.
Besides the 30-year Bond auction tomorrow, we also get the week’s first economic news. There are two pieces of data scheduled for release at 8:30 AM ET tomorrow, but one is much more important to the financial and mortgage markets than the other. The key data is November’s Retail Sales report from the Commerce Department. It will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher tomorrow. Current forecasts are calling for an increase of 0.6% in November’s sales.
Also early tomorrow morning, we will get last week’s unemployment figures. The Labor Department is expected to announce that 315,000 new claims for unemployment benefits were filed last week, up from the surprisingly low 298,000 of the previous week. Rising initial claims indicates a softening employment sector, so the higher the number of new filings, the better the news it is for bonds and mortgage rates. However, since this report tracks only a single week’s worth of initial claims, it usually takes a wide variance from forecasts for the data to affect mortgage pricing.