Tuesday’s bond market has opened flat despite strong results in both of this morning’s headline economic readings. The stock markets are also having somewhat of a muted reaction to the data with the Dow up 53 points and the Nasdaq up 5 points. The bond market is currently unchanged from yesterday’s close, which should keep this morning’s mortgage pricing at yesterday’s levels.
July’s Durable Goods Orders was the first of two relevant reports posted this morning, revealing a 22.6% spike in new orders at U.S. factories for big-ticket products. This was a record monthly spike and much stronger than expected. However, the increase is being attributed to a significant jump in new airplane orders that skewed the broader numbers. If more volatile transportation-related orders are excluded, there was actually a 0.8% decline when analysts were expecting to see a 0.6% rise. In other words, the headline reading indicates strong economic growth while the more stable ex-transportation reading hints at weakness. That has prevented a much larger reaction in the financial and mortgage markets.
August’s Consumer Confidence Index (CCI) was released at 10:00 AM ET. The Conference Board announced a reading of 92.4 that was well above the 88.3 that was expected. This means that surveyed consumers were much more confident in their employment and financial situations and more likely to make a large purchase in the near future than many had thought. Because those purchases fuel economic growth, the data is bad news for the bond and mortgage markets. Fortunately, traders seem to be unconcerned about the news.
There is no economic data scheduled for release tomorrow that is expected influence mortgage rates. We do have the first of this week’s two Treasury auctions that have the potential to affect bond trading and mortgage pricing. Tomorrow’s auction has 5-year Treasury Notes being sold followed by Thursday’s 7-year Note sale. Results of the auctions will be posted at 1:00 PM ET each day. If investor interest is strong, it is possible that the broader bond market will rally and mortgage rates could move lower during afternoon trading. However, a lackluster demand could lead to bond selling and higher mortgage rates tomorrow and/or Thursday afternoons.