Wednesday’s bond market has opened in negative territory with stocks showing minor gains and no relevant economic data set to influence trading. The Dow is currently showing a 42 point gain while the Nasdaq is up 7 points. The bond market is currently down 5/32 (2.13%), but we likely will still see a slight improvement in this morning’s mortgage rates due to a little strength in trading late yesterday.
Even though there is no relevant economic data being posted this morning, we do have an afternoon even that probably will affect bonds and possibly mortgage rates. That would be the first of two Treasury auctions this week that could potentially affect mortgage rates. The first is the 10-year Treasury Note auction tomorrow and the 30-year bond sale will take place tomorrow. Results of today’s auction will be posted at 1:00 PM ET, so any reaction will come during early afternoon hours. If investor demand was high, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates later today.
Tomorrow brings us the release of two pieces of economic data in addition to the 30-year Bond sale. One of these reports is much more important to the bond and mortgage markets than the other. February’s Retail Sales data is the important report. It will come from the Commerce Department at 8:30 AM ET tomorrow morning. This data is extremely important to the financial markets because it measures consumer spending strength. Since consumer spending makes up over two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month’s report is expected to show an increase in sales of approximately 0.4%. If it reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate a stronger level of economic growth than many had thought. If it reveals a much weaker level of spending, I expect to see bond prices rise and mortgage rates improve tomorrow morning.
The second piece of economic news will be last week’s unemployment figures. They are expected to show that 306,000 new claims for unemployment benefits were filed last week, down from the previous week’s 320,000 initial claims. Rising initial claims indicates employment sector weakness, so the higher the number the better the news it is for bonds and mortgage rates. Although it is worth noting that because this is only a weekly snapshot, it usually does not cause much movement in mortgage pricing unless it shows a large variance from forecasts.