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Thursday’s bond market has opened flat even though one of this morning’s economic reports gave us unfavorable results. The stock markets are calm also with the Dow up 21 points and the Nasdaq up 2 points. The bond market is almost unchanged from yesterday’s close, but we still should see an improvement of approximately .125 of a discount point in this morning’s mortgage rates due to strength late yesterday.
Yesterday’s 5-year Treasury Note auction went very well with several indicators we use to measure investor demand showing a high level of interest. That helped fuel some afternoon buying in bonds and led to some lenders revising their rates to show a slight improvement. If today’s 7-year Note sale goes just as well, we could see another strong afternoon for the bond market and mortgage rates. Results of the sale will be posted at 1:00 PM ET, so look for any reaction to come during early afternoon hours again.
There were two pieces of economic data posted this morning, both at 8:30 AM ET. The first was last week’s unemployment numbers that showed new claims for unemployment benefits fell 10,000 last week. The 311,000 initial claims were well below forecasts of 330,000 and the lowest number we have seen since late November. That means that the employment sector strengthened last week, making the data negative for mortgage rates. Fortunately though, this is only a weekly snapshot of one indicator, so its impact on this morning’s pricing has been minimal.
Also posted early this morning was the second revision to the 4th Quarter GDP. It didn’t reveal any surprises, showing that the economy grew at a 2.6% annual pace last quarter. This was a small upward revision from the previous estimate of 2.4%, but matched forecasts. Even a secondary reading that helps us track prices and inflation pegged expectations. Since there were no surprises in the data that is now three to six months old, the news failed to move the financial or mortgage markets. Analysts and market traders are much more concerned with next month’s preliminary reading of the current quarter.
Tomorrow also has two pieces of economic data for the markets to digest, starting with February’s Personal Income & Outlays report at 8:30 AM ET. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending related information has on the financial markets. If a consumer’s income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.2% increase in income and a 0.3% rise in spending. Smaller than expected increases would be good news for bonds and mortgage shoppers.
The final report of the week comes from the University of Michigan just before 10:00 AM ET tomorrow. Their revision to their March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers’ willingness to spend. As with Tuesday’s CCI report, rising confidence is considered bad news for the bond market and mortgage pricing. Tomorrow’s report is expected to show little change from the preliminary reading of 79.9. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.