Tuesday’s bond market has opened in negative territory following much stronger than expected housing data. The stock markets are rallying with the Dow up 197 points and the Nasdaq up 65 points. The bond market is currently down 11/32 (1.87%), but due to some strength late yesterday I don’t believe we will see much of a change in this morning’s mortgage rates.
April’s New Home Sales report was posted at 10:00 AM ET this morning. The Commerce Department announced a 16.6% spike in sales of newly constructed homes. This was the largest monthly increase in over 24 years and was the best level of sales since January 2008. The increase indicates strength in the new home portion of the housing sector, making the data bad news for mortgage pricing. Although this report doesn’t usually carry much significance, this surprisingly strong release has negatively impacted this morning’s bond and mortgage markets.
There is no relevant data scheduled for release tomorrow morning, but we do have the first of this week’s two Treasury auctions that have the potential to influence rates. The Fed will auction 5-year Notes tomorrow and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates.
On the other hand, strong investor demand in these usually make bonds more attractive to investors, bringing more funds into the bond market. The buying of bonds that follows often translates into slightly lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours tomorrow and Thursday.
We do have some fairly important data coming later in the week, including Durable Goods Orders and the revised 1st quarter GDP reading. None of the remaining data is considered key, but it does carry enough importance to cause movement in mortgage rates.