Thursday’s bond market has opened in negative territory, extending yesterday’s afternoon weakness. Stocks are following suit with the Dow down 92 points and the Nasdaq down 35 points. The bond market is currently down 13/32 (1.97%), which with yesterday’s afternoon selling should push this morning’s mortgage rates higher by approximately .250 of a discount point if comparing to Wednesday’s morning pricing.
Yesterday’s afternoon weakness in bond trading can partly be attributed to a weak 5-year Treasury Note auction. Many of the benchmarks we use to gauge investor demand showed a lackluster interest in the securities. Bonds were already down from morning levels but extended that downward move after results of the sale were posted at 1:00 PM ET. That doesn’t give us too much to be optimistic about in today’s sale of 7-year Notes. If we see a similar level of demand in this sale, we can expect to see more weakness in bonds later this afternoon, possibly reaching mortgage rates. Results will be posted at 1:00 PM ET again today, so any reaction will likely come during early afternoon trading.
Today’s only relevant economic data was last week’s unemployment figures at 8:30 AM ET. They revealed that 282,000 new claims for unemployment benefits were filed last week, down from the previous week’s 291,000. That indicates that the employment sector strengthened last week, making the data negative for bonds and mortgage rates. However, this morning’s bond selling is more a result of several factors combined than it is of this report. This was only a weekly snapshot and was not enough of a variance to cause this much movement in bonds.
Tomorrow has two pieces of data scheduled for release. The first of them comes at 8:30 AM ET when the 2nd revision to the 4th Quarter GDP will be posted. This is the second and final revision to January’s preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. The GDP is the benchmark measurement of economic activity. It is expected to show that the economy grew at an annual pace of 2.4% last quarter, up from the previous estimate of 2.2% that was released last month. Analysts are now more concerned with next month’s preliminary reading of the 1st quarter than data from three to six months ago, so I don’t expect this report to affect mortgage rates much unless it shows a wide variance from forecasts.
The final report of the week will be the University of Michigan’s revised March Consumer Sentiment Index just before 10:00 AM ET. This will give us another indication of consumer confidence, which hints at consumers’ willingness to spend. Rising confidence is considered bad news for the bond market and mortgage pricing because it usually means consumers are more willing to spend. Tomorrow’s report is expected to show a reading of 92.0, up from the preliminary reading of 91.2. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.