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Tuesday’s bond market has opened in positive territory due to weaker than expected economic data. The stock markets are fairly flat with the Dow down 10 points and the Nazdaq nearly unchanged from yesterday’s close. The bond market is currently up 12/32, which should improve this morning’s mortgage by approximately .250 of a discount point.
The Conference Board announced late this morning that their Consumer Confidence Index (CCI) for February stood at 78.1. This was lower than the 80.8 that was expected, but partially offsetting that news was a downward revision to January’s reading. What was initially an 80.7 reading for January was changed to 79.4. So while we did see a decline, indicating consumers were less comfortable with their own financial situations than thought, it was by a smaller margin from last month than what appears. Still, the data is favorable for the bond market and mortgage rates as it points towards softer consumer spending levels.
Tomorrow has only January’s New Home Sales report scheduled on the economic calendar. It will be posted at 10:00 AM ET and is the least important report of the week. It is considered to be the sister report to last week’s Existing Home Sales data, also measuring housing sector strength. However, because new home sales make up a much smaller portion of the overall housing sector than resales, this report usually does not have a significant impact on bond trading or mortgage rates unless it shows a significant surprise. January’s sales are expected to have declined, hinting at weakness in the new home portion of the housing sector. Ideally, the bond market would prefer to see noticeable housing sector weakness because it makes broader economic growth more difficult and bonds tend to thrive during weaker economic conditions.
Also tomorrow is the first of two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year 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. However, sales with higher levels of investor demand usually make bonds more attractive to investors and brings additional funds into the bond market. The buying of bonds that follows usually translates into lower mortgage rates.