Monday’s bond market has opened down slightly despite favorable housing news. The stock markets are starting the week with minor gains of 28 points in the Dow and 23 points in the Nasdaq. The bond market is currently down 2/32 (2.27%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point. Most of that increase though is coming from weakness late Friday and not a result of this morning’s economic data.
Today’s only relevant economic data was October’s Existing Home Sales data at 10:00 AM ET. The National Association of Realtors announced that home resales fell 3.4% last month. That was a larger than expected decline and indicates the housing sector was weaker than analysts thought. Because a weakening housing sector makes broader economic growth more difficult, we should consider the data good news for bonds and mortgage rates. Unfortunately, this is only a moderately important report and did not have a noticeable influence on this morning’s mortgage pricing.
Tomorrow morning has two reports set for release, starting with the first revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. It is expected to show an upward revision to last month’s preliminary reading of a 1.5% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the benchmark measurement of economic growth. Current forecasts call for a reading of approximately 2.0%, meaning that there was more economic activity during the third quarter than previously thought. This would be bad news for the bond market and mortgage rates because strengthening economic growth makes bonds less appealing to investors that hurts bond prices and mortgage rates.
November’s Consumer Confidence Index (CCI) will be released at 10:00 AM ET tomorrow morning by the Conference Board. This index helps us track consumer willingness to spend. If a consumer’s confidence in their own financial and employment situation is strong, analysts believe that they are more apt to make larger purchases, fueling economic growth. This is important because consumer spending makes up over two-thirds of the U.S. economy and makes long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to see an increase in confidence from last month’s level, meaning surveyed consumers were more optimistic about their own financial situations this month than they were last month. A weaker reading than the 99.6 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.
Also tomorrow is the first of this week’s two Treasury auctions that have the potential to affect mortgage rates. 5-year Treasury Notes will be sold tomorrow while 7-year Notes go Wednesday. 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 in mortgage rates. However, strong investor demand usually makes bonds more attractive to investors and brings more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the tomorrow’s sale will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading.
Overall, I am expecting Wednesday to be the busiest day for the bond market and mortgage rates with three of the week’s reports scheduled, but tomorrow is likely to be pretty active also. The calmest day of the week will most likely be Friday as many traders will be home for the long weekend following Thursday’s Thanksgiving holiday.