Tuesday’s bond market has opened in positive territory despite mostly unfavorable economic news. A weak open in stocks is helping to boost bond prices as the holiday-shortened week kicks off. The Dow is down 149 points while the Nasdaq has lost 48 points. The bond market is currently up 8/32 (2.18%), but due to weakness Friday before closing for the long weekend we likely will see little change in this morning’s mortgage rates.
There were three pieces of economic data released this morning, beginning with April’s Durable Goods Orders at 8:30 AM. The Commerce Department announced that new orders for big-ticket products fell 0.5% last month, nearly matching forecasts of a 0.6% decline. If transportation-related orders such as airplanes are excluded, new orders rose 0.5% when analysts were expecting 0.4%. Both variances are extremely minor in this traditionally volatile data, so its impact on today’s bond trading and mortgage pricing has been fairly minimal.
May’s Consumer Confidence Index (CCI) was released at 10:00 AM this morning, revealing a reading of 95.4 that was higher than analysts’ forecasts of 94.0. This means that surveyed consumers were a little more confident about their own financial and employment situations than expected. Because rising confidence usually means consumers are more apt to make a large purchase in the near future, fueling economic growth, we should consider this news negative for mortgage rates.
April’s New Home Sales report was today’s last piece of relevant data. This Commerce Department report showed sales of newly constructed homes rose 6.8% last month. That was a larger increase than forecasts were calling for, indicating strength in the new home portion of the housing sector. Accordingly, that makes the data negative for bonds and mortgage rates. However, this report is not considered to be highly important to the financial and mortgage markets.
Tomorrow has nothing scheduled for release that is expected to affect mortgage rates but we do have the first of this week’s two Treasury auctions that are worth watching. The Treasury 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 sales usually make bonds more attractive to investors, bringing additional funds into bonds. The buying of bonds that follows usually translates into 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.