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Wednesday’s bond market has opened in positive territory with stocks showing early weakness and no economic data to be concerned with. The major stock indexes are showing minor losses with the Dow down 47 points and the Nasdaq down 12 points. The bond market is currently up 10/32, which should improve this morning’s mortgage rates by approximately .125 – .250 of a discount point over Tuesday’s morning pricing.
As we have seen each day so far this week, there is nothing of importance scheduled for release this morning that is likely to affect mortgage rates. With stocks in negative territory, bonds are taking the opportunity to move higher. The yield on the benchmark 10-year Treasury Note currently stands at 2.73% after touching 2.80% late last week and nearly again yesterday. In other words, this morning’s gains aren’t a complete surprise but they very well could be short-lived.
Even though there was no economic data posted this morning, we still have the first of this week’s two Treasury auctions that are likely to affect mortgage rates later today. That would be the 10-year Note auction, which will be followed by the 30-year bond sale tomorrow. Results of the sales will be posted at 1:00 PM ET. If investor demand was high, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates later today and again possibly tomorrow.
This week’s first piece of economic data is one of the more important ones we get each month. February’s Retail Sales data will come from the Commerce Department at 8:30 AM ET tomorrow, giving us a key measure of consumer spending levels. This data is extremely important to the financial markets because consumer spending makes up over two-thirds of the U.S. economy and any data that is related usually has a big impact on the markets. This month’s report is expected to show an increase in sales of approximately 0.2%. If it reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate a stronger level of economic growth than many had thought. If it reveals a much weaker level of spending, I expect to see bond prices rise and mortgage rates improve tomorrow morning.
Also early tomorrow morning, we will get last week’s unemployment figures. They are expected to show that 329,000 new claims for unemployment benefits were filed. This would be an increase from the previous week’s total of 323,000. Rising claims is a sign of a softening employment sector. Therefore, the higher the number of new claims, the better the news it is for the bond market and mortgage rates. However, it is worth noting that because this is a weekly snapshot rather than a monthly report, it usually takes a wide variance form forecasts for the data to directly move mortgage rates.