Tuesday’s bond market has opened in positive territory following mixed economic news. Stocks are showing moderate losses with the Dow down 77 points and the Nasdaq down 34 points. The bond market is currently up 4/32 (2.22%), which should improve this morning’s mortgage rates slightly from yesterday’s levels.
The first revision of the 3rd Quarter Gross Domestic Product (GDP) was released at 8:30 AM ET this morning. It showed a 2.1% annual rate of growth in the GDP during the quarter, up from the initial estimate of 1.5%. Analysts were expecting to see a 2.0% rate, meaning the economy grew at a faster pace in the July through September months than previously announced and at a slightly stronger rate than many had expected today’s release to show. The upward revision is basically bad news for bonds, but since the market was already expecting the change, the variance is pretty minimal and has had only a slight impact on today’s mortgage rates.
November’s Consumer Confidence Index (CCI) was also posted this morning. The 10:00 AM ET posting showed a reading of 90.4 that was the lowest reading in over a year. A reading of 99.6 was forecasted, indicating that fewer surveyed consumers felt good about their own financial and employment situations than did in October. That makes the data good news for bonds and mortgage rates.
We also have the 5-year Treasury Note auction to watch for today. This is the first of the week’s two Treasury auctions that have the potential to affect mortgage rates. 7-year Notes will be sold 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 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 today’s sale will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. Results of tomorrow’s sale are currently set for 11:30 AM ET.
Tomorrow has four economic reports that we need to be concerned with. The first is October’s Durable Goods Orders at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items or products that are expected to last three or more years, such as airplanes, appliances and electronics. This data is known to be quite volatile from month-to-month, so sizable swings from the previous month are fairly normal. It is expected to show a 1.5% rise in new orders. A smaller than expected increase would be considered good news for the bond market and mortgage rates as it would indicate the manufacturing sector was not as strong as thought. We need to see a sizable variance from forecasts though for the markets to have a noticeable reaction due to the usual volatility in the data. It is worth noting though that this is one of the more important reports we get each month.
October’s Personal Income and Outlays data is the second report of the day. This data measures consumers’ ability to spend and their current spending habits. It is important because consumer spending is such a large part of the U.S. economy. It is expected to show that income rose 0.4% and that spending increased 0.3%. Weaker than expected readings would mean consumers had less money to spend and were spending less than thought. That would be favorable news for bonds and could lead to improvements in mortgage rates early tomorrow morning.
Next up is last week’s unemployment figures that are expected to show that 272,000 new claims for unemployment benefits were filed last week. This would be a slight change from the previous week’s 271,000 initial claims. The higher the number of filings, the better the news it is for mortgage rates because rising claims indicates a weakening employment sector.
October’s New Home Sales report will close out the week’s economic calendar. It will give us an indication of housing sector strength, but is the week’s least important monthly release. Analysts are expecting to see an increase between September and October’s sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates, partly because this report tracks such a small portion of all home sales.