Tuesday’s bond market has opened well in negative territory as stocks reverse a good part of yesterday’s losses. The major stock indexes are rebounding from the massive sell-off of the previous few days, but are still well below where they were early last week. The Dow is currently up 303 points while the Nasdaq has gained 131 points. The bond market is currently down 23/32 (2.09%), which should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point if comparing to Monday’s morning pricing.
July’s New Home Sales data was posted at 8:30 AM ET this morning. The Commerce Department announced that sales of newly constructed homes rose 5.4% last month. This was a little softer than analysts were expecting to see, indicating the new home portion of the housing sector may not be as strong as thought. However, this was a minor variance from forecasts in a report that usually does not draw too much attention. Therefore, its impact on today’s trading has been almost non-existent.
Late this morning, the Conference Board released their Consumer Confidence Index (CCI) for August. It came in much higher than forecasts, meaning surveyed consumers felt better about their employment and overall financial situations than predicted. The 101.5 greatly exceeded the 92.6 that was expected, making the data bad news for the bond and mortgage markets. Although, today’s bond trading has been focused on stock movement and activities overseas, not this morning’s data.
July’s Durable Goods Orders will be released by the Commerce Department at 8:30 Am ET tomorrow morning, giving us an important measurement of manufacturing sector strength. This report tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as appliances, electronics and airplanes. Analysts are expecting to see a decline of 0.6% in new orders, indicating manufacturing sector weakness. This data is known to be quite volatile from month to month, so a decline of this size doesn’t raise too much concern about the economy. However, a decent sized decline is good news for the bond market and mortgage rates as it means manufacturing activity is likely softening. A secondary reading the excludes more volatile transportation-related orders is expected to rise 0.4%. The softer the reading, the better the news it is for the bond and mortgage markets.
Also tomorrow is the first of this week’s two Treasury auctions that may affect bond trading and mortgage rates. There are auctions several days, but the two relevant ones are tomorrow’s 5-year Note and Thursday’s 7-year Note sales. Results of these will be posted at 1:00 PM ET each day. If investor interest is strong in the auctions, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates tomorrow and Thursday afternoons.
We also will be watching stocks and overseas markets for mortgage rates direction. If the major stock indexes continue to climb, we should see more pressure on bonds and upward changes to mortgage rates. On the other hand, if they spiral downward again, mortgage rates should move a little lower.