Tuesday’s bond market has opened in positive territory following favorable housing related news. The stock markets are mixed but fairly calm with the Dow up 25 points and the Nasdaq down 1 point. The bond market is currently up 4/32 (2.34%). However, due to selling late yesterday, we still may see a slight increase in this morning’s mortgage rates if comparing to Monday’s morning pricing.
May’s Housing Starts was today’s only relevant economic data. The Commerce Department said at 8:30 AM ET that new housing groundbreakings fell 11.1% last month. This was a much larger decline than expected, indicating that the new home portion of the housing sector may be slowing. That is good news for bonds and mortgage rates because weaker economic conditions make bonds more attractive to investors.
Tomorrow has no important economic data set for release but it is a huge Fed day with three separate but related events taking place during afternoon trading. The first is the 2:00 PM adjournment of the FOMC meeting that began today. It is widely expected that Chairman Yellen and company will not change key short-term interest rates at this meeting, but market participants will be watching the post-meeting statement for any hints at when they will make their increase to key short-term interest rates. If there are any surprises, look for an immediate reaction in the financial and mortgage markets.
Also at 2:00 PM ET, the Fed will release their updated estimates for future economic growth. They will likely post their predictions on GDP growth, unemployment and inflation. These could be a market mover if they show even minor revisions to any of the key headline economic numbers. The larger the change, the more likely the markets will react. Revisions that point toward slower economic growth would be good news for the bond market and mortgage rates as it would mean the Fed will probably make that rate increase later than sooner.
They will be followed by a press conference hosted by Fed Chairman Yellen at 2:30 PM ET. These press conferences with the media often lead to significant afternoon volatility in the markets and mortgage rates. Any surprises will probably cause a noticeable reaction in the markets. That means there is a high probability of seeing afternoon changes to mortgage rates tomorrow afternoon.