Wednesday’s bond market has opened in positive territory as questions arise again about the Greek bailout program. The major stock indexes are showing losses as a result, pushing the Dow lower by 62 points and the Nasdaq down 7 points. The bond market is currently up 5/32 (2.39%), but I am not expecting to see much of a change in this morning’s rates if comparing to Tuesday’s early pricing. Bonds improved during early afternoon trading yesterday before weakening as the day came to a close. When coupled with this morning’s improvement, I believe we should be right back to where we were yesterday morning.
The final reading to the 1st Quarter Gross Domestic Product (GDP) was posted at 8:30 AM ET this morning. It showed that the economy contracted at a 0.2% annual rate last quarter. This was better than the 0.7% that the first revision showed but matched forecasts. The lack of a significant surprise and the fact that the report tracks activity from nearly 4 -6 months ago has prevented the news from affecting this morning’s rates.
We also have the first of this week’s two Treasury auctions that are potentially influential on mortgage rates. These sales may affect broader bond trading enough to cause a change in mortgage rates if they show strong or weak investor demand. If the sale was met with a strong demand from investors, we could see bond prices rise during afternoon trading today. This could lead to improvements in mortgage rates also. However, if the sales draw a lackluster interest from investors, mortgage rates may move higher later today.
Besides the 7-year Treasury Note auction, tomorrow also has two pieces of economic data that may have an impact on mortgage rates. The first is last week’s unemployment numbers that are expected to show 271,000 new claims for unemployment benefits were filed last week. This would be an increase from the previous week’s 267,000 initial claims, indicating the employment sector softened slightly last week. Since rising claims hints at a weakening employment sector, the larger the number the better the news it is for mortgage rates. Although, it is worth noting that because this is only a weekly snapshot, it usually takes a surprise increase or decline for the report to noticeably affect rates.
May’s Personal Income and Outlays data will also be posted at 8:30 AM ET. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up over two-thirds of the U.S. economy. If consumer income is rising, they have more money to spend each month. Analysts are expecting to see an increase of 0.4% in income and a 0.7% rise in the spending portion of the report. Smaller increase in both of these readings would be considered good news for the bond market and mortgage rates.