Tuesday’s bond market has opened flat again even though we saw two favorable pieces of economic data. The stock markets are fairly calm also with the Dow up 26 points and the Nasdaq up 6 points. The bond market is currently down 1/32 (1.91%), which should keep this morning’s mortgage rates at yesterday’s levels.
March’s Durable Goods Orders was the first of this morning’s two relevant economic report. The Commerce Department announced at 8:30 AM ET that new order for big-ticket items rose 0.8% at U.S. factories last month, falling short of the 1.7% that was expected. Even a secondary reading that excludes more volatile products such as orders for new airplanes came in much lower than forecasts (-0.2% vs +0.5%). The data signals that the manufacturing sector is not as strong as many had thought, making the data good news for bonds and mortgage rates. This is a pretty important report, so it is a bit surprising that we have not seen a more positive reaction to the data.
April’s Consumer Confidence Index (CCI) was released at 10:00 AM ET by the Conference Board. This non-governmental agency said their CCI stood at 94.2 this month. That was well below forecasts of 96.7 and was decline from March’s revised 96.1. What that means is that fewer surveyed consumers were comfortable with their personal financial situations than were in March. Because waning confidence usually translates into softer levels of consumer spending and weaker economic growth, this is report is also good news for mortgage rates.
Today also has the first of two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. 5-year Treasury Notes are being sold today while 7-year Notes go 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. On the other hand, strong sales usually make government securities more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours.
There is no influential economic data being posted tomorrow, but we do have the FOMC meeting adjournment mid-afternoon. It will likely adjourn with an announcement of no change to key short-term interest rates, but we may see some volatility in the markets following the post-meeting statement. If the statement gives any hint of change in their current forecasts on when they expect to adjust key short-term interest rates again, we could see a sizable change to mortgage rates tomorrow afternoon. This meeting will not be followed by a Fed press conference or economic projections.