Wednesday’s bond market has opened flat with nothing of importance set for release this morning and stocks showing strength. The Dow is currently up 137 points while the Nasdaq is up 27 points. The bond market is currently unchanged from yesterday’s close (1.86%), which should keep this morning’s mortgage rates close to yesterday’s morning levels.
Even though we don’t have any relevant economic data being posted this morning, we do have an afternoon event that has the potential to affect bond prices enough to influence mortgage pricing slightly. That would be the first of this week’s two Treasury auctions that is being held today. The Fed will auction 5-year Notes today and 7-year Notes tomorrow. 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 are posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours today and/or tomorrow.
Tomorrow has two pieces of economic data set for release, both at 8:30 AM ET. The more important of the two is April’s Durable Goods Orders. This Commerce Department report gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years such as airplanes, appliances and electronics. It is currently expected to show an increase in new orders of approximately 0.6%, hinting that the manufacturing sector strengthened a little last month. That would be relatively bad news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts will likely have little impact on mortgage rates. The larger the decline, the better the news it is for mortgage rates.
The second release of the morning will be last week’s unemployment figures. They are expected to show that 275,000 new claims for unemployment benefits were filed last week, down from the previous week’s 278,000 initial claims. This report usually doesn’t cause much movement in the markets or mortgage rates unless it shows a significant jump or drop in initial claims for benefits. The higher the number of claims, the better the news it is for bonds and mortgage rates since rising claims is a sign of employment sector weakness.