Thursday’s bond market has opened in positive territory following much weaker than expected economic news. The stock markets are showing strength despite the weaker data, pushing the Dow up 62 points and the Nasdaq up 34 points. The bond market is currently up 9/32 (1.97%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
Yesterday’s 10-year Treasury Note sale actually went very well with several indicators pointing toward a high level of investor interest. That raises optimism that today’s 30-year Bond auction will also be met with a good demand from investors. If that is the case, we could see bond prices strengthen this afternoon, possibly leading to mortgage rates moving slightly lower. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon hours.
The Commerce Department gave us today’s key economic data with the release of January’s Retail Sales report at 8:30 AM ET. They announced a 0.8% drop in retail-level sales that was twice the decline analysts were expecting (-0.4%). Even a secondary reading that excludes more volatile and pricey auto sales showed noticeably weaker spending than many had thought (-0.9% vs -0.4%). Those readings are good news for bonds and mortgage rates because they point towards slower overall economic growth that makes mortgage-related bonds more attractive to investors.
Also posted early this morning was last week’s unemployment figures that showed 304,000 new claims for unemployment benefits were filed. This was a sizable increase from the previous week’s revised 279,000 initial claims and indicates a weakening employment sector. That makes the data favorable for the bond and mortgage markets, although it has had a minimal impact on today’s rates because it is only a weekly snapshot of the sector.
February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will be released just before 10:00 AM ET tomorrow morning. This index measures consumer willingness to spend and also usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to come in at 98.3, up slightly from January’s final reading of 98.1. That would indicate consumers were a little more optimistic about their own financial situations than last month and are more likely to make large a purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered slightly negative news for bonds and mortgage pricing. Ideally, we would prefer to see a large decline in confidence.