Thursday’s bond market has opened in negative territory with stocks opening in positive ground and unfavorable economic data being released. Stocks are fairly calm but showing minor gains. The Dow is currently up 20 points while the Nasdaq has gained 5 points. The bond market is currently down 6/32 (2.39%), but due to some strength late yesterday, we should see this morning’s mortgages rates remain at yesterday’s early pricing.
The first of this morning’s two reports was last week’s unemployment numbers at 8:30 AM ET. It showed that 271,000 new claims for unemployment benefits were filed last week, up from the previous week’s revised total of 268,000. This matched forecasts and has not had an impact on today’s trading or mortgage rates. The increase is a favorable sign because rising claims indicates a softening employment sector. However, it was expected and this data is considered to be of low importance unless it shows a significant variance from forecasts.
Also at 8:30 AM was May’s Personal Income and Outlays data that showed personal income rose 0.5% and a 0.9% increase in spending. Both readings exceeded forecasts, particularly the spending reading. Analysts were expecting to see a 0.4% rise in come and a 0.7% increase in spending. This means that consumers had more money to spend and spent more than many in the markets had thought. Because consumer spending makes up approximately 70% of our economy, this is bad news for the bond and mortgage markets.
Later today we will be watching the results of the 7-year Treasury Note auction. Yesterday’s 5-year Note sale didn’t go very well with several of the benchmarks used to gauge investor demand showing a weak level of interest. Therefore, we shouldn’t have high expectations for today’s auction. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. Another weak sale could lead to a small afternoon increase in rates.
The University of Michigan will close out this week’s data late tomorrow morning with their updated Index of Consumer Sentiment for May. This index gives us a measurement of consumer willingness to spend. If consumers are more comfortable with their own financial and employment situations, they are more apt to make large purchases in the near future, fueling economic growth. Accordingly, any consumer spending related data has the potential to affect bond trading and mortgage rates. A downward revision would be considered good news for bonds and rates, but forecasts are calling for little change from this month’s preliminary reading of 94.6.