Tuesday’s bond market opened in negative territory but has since moved into positive ground following favorable late morning economic news. The stock markets are showing fairly sizable losses with the Dow down 147 points and the Nasdaq down 53 points. The bond market is currently up 5/32 (1.74%), but due to weakness late yesterday we likely will see little change in this morning’s mortgage rates. The rebound during early trading will offset the small increase we were expecting in today’s pricing.
January’s Existing Home Sales data was posted at 10:00 AM ET this morning. The National Association of Realtors reported that home resales rose slightly last month when analysts were expecting to see a decline. This means the housing sector was a little stronger than many had thought, making the data negative for bonds.
The Conference Board gave us February’s Consumer Confidence Index (CCI) this morning. They announced a reading of 92.2 that fell well short of the 97.3 that was expected. The weaker reading means surveyed consumers were not nearly as confidant about their personal financial situations than many had predicted. Since waning confidence usually translates into weaker levels of spending and softer economic growth, this is good news for bonds and mortgage rates. It was this report that helped bring bonds from early losses into positive ground.
January’s New Home Sales report is tomorrow’s only relevant data. It will be posted at 10:00 AM ET and will give us a measurement of housing sector strength, specifically the new home portion of the sector. This is the least important report of the week, and is the sister report to today’s Existing Home Sales data. This report usually do not have a significant impact on bond trading or mortgage rates, so it will take a wide variance from forecasts for it to affect tomorrow’s mortgage pricing. Tomorrow’s report is expected to show a decline in sales of newly constructed homes, hinting at weakness in the new home portion of the housing sector. The larger the decline, the better the news it is for bonds and mortgage rates.
Also tomorrow is the first of this week’s two Treasury auctions that may influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes tomorrow and 7-year Notes 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 afternoon selling in the bond market that leads to upward revisions to mortgage rates. However, sales with higher levels of investor demand usually make bonds more attractive to investors and brings additional funds into the bond market. The buying of bonds that follows translates into lower mortgage rates.