Wednesday’s bond market has opened up slightly nut not be enough to offset weakness late yesterday. The stock markets are showing sizable losses with the Dow down 129 points and the Nasdaq down 21 points. The bond market is currently up 4/32 (2.20%), although we still may see a slight increase in this morning’s mortgage rates if comparing to yesterday’s morning pricing. This is a result of stock strength that led to bond weakness during late trading Tuesday.
We have nothing of significance being released this morning. However, we do have the first of this week’s two Treasury auctions that may affect mortgage rates. 10-year Treasury Notes are being auctioned today while 30-year Bonds will be sold tomorrow. Results of the sales will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, particularly international buyers, we should see strength in the broader bond market and improvements to mortgage pricing during afternoon hours. On the other hand, a weak interest in the auctions could lead to upward revisions to mortgage rates.
Besides the 30-year Bond auction, tomorrow morning brings us the weekly unemployment update and November’s Retail Sales report. The unemployment release is expected to show that 295,000 new claims for unemployment benefits were filed last week. This would be a slight decline from the previous week’s 297,000 initial claims. The larger the number of new claims, the better the news it is for mortgage rates as rising claims is a sign of employment sector weakness. However, because this report tracks only a single week’s worth of new filings, it usually takes a surprise spike or drop for it to noticeably affect mortgage rates.
November’s Retail Sales report is also scheduled for release at 8:30 AM ET tomorrow. This report will give us a key measurement of consumer spending by tracking sales at retail level establishments. This data is highly important to the markets because consumer spending makes up over two-thirds of the U.S. economy. Rapidly rising consumer spending raises the possibility of seeing solid economic growth. Since long-term securities such as mortgage bonds are usually more appealing to investors during weaker economic conditions, a large increase in retail sales will likely drive bond prices lower and mortgage rates higher tomorrow. Current forecasts are calling for an increase of 0.4% in November’s sales.