Tuesday’s bond market has opened in negative territory following early stock strength and much stronger than expected economic news. Stocks are in rally mode with the Dow up 240 points and the Nasdaq up 23 points. The bond market is currently down 3/32 (2.01%), which should keep this morning’s mortgage rates close to yesterday’s levels.
January’s Consumer Confidence Index (CCI) was posted at 10:00 AM ET this morning, revealing a reading of 98.1 that was almost two points higher than December’s revised reading. It also exceeded forecasts of 96.8, indicating surveyed consumers were more optimistic about their own financial and employment situations than many had thought. That is considered bad news for bonds and mortgage rates because rising confidence usually translates into more consumer spending, making for a stronger economy.
Tomorrow has one economic report we will be watching but it will likely be one of the afternoon events that will be the center of attention. December’s New Home Sales will be released at 10:00 AM ET tomorrow morning. It is considered to be the sister release to last week’s Existing Home Sales, giving us a small snapshot of housing sector strength. It tracks a much smaller portion of home sales than last week’s report did and is forecasted to show an increase in sales of newly constructed homes. However, this data is not important enough to heavily influence mortgage pricing unless it varies greatly from forecasts.
This year’s first FOMC meeting that began today will adjourn at 2:00 PM ET tomorrow. There was a decent chance of this meeting yielding another quarter point increase to key short-term interest rates before the recent sell-off in stocks and oil costs. But now I believe the significant selling in stocks recently may alter the Fed’s monetary policy plans, at least temporarily. A rate hike is still possible though, so we need to be prepared in case it does happen. Afternoon volatility in the markets tomorrow is a strong possibility following the post-meeting statement release. This statement will not precede a press conference like last meeting did.
Also worth noting is tomorrow’s 5-year Treasury Note auction. If the sale is met with a strong demand from investors, the broader bond market may improve after results are posted at 1:00 PM ET. If they draw a lackluster interest, they could lead to bond selling and higher mortgage rates until we get to the FOMC statement. A strong interest in the securities could help boost bond prices.