Tuesday’s bond market has opened in negative territory following mixed economic news. Stocks are showing gains at the moment with the Dow up 52 points and the Nasdaq up 46 points. The bond market is currently down 7/32 (2.28%), but we likely won’t see much of a change in this morning’s mortgage rates if comparing to yesterday’s early pricing.
The Commerce Department gave us the first of this morning’s two pieces of relevant economic data with September’s Durable Goods Orders. At 8:30 AM ET, they announced that new orders for big-ticket products such as airplanes, electronics and appliances fell 1.3% last month. This was weaker than the 0.7% increase that was forecasted, meaning manufacturing activity was softer than many had thought. Even the secondary reading that excludes more costly and volatile transportation-related orders showed weaker activity than expected (-0.2% vs +0.5%). That makes the data favorable for bonds and mortgage rates because weaker economic activity makes longer-term securities such as mortgage bonds more attractive to investors.
At 10:00 AM ET, the Conference Board reported that their Consumer Confidence Index (CCI) for October stood at 94.5. This was much stronger than analysts were predicting and its best reading in 7 years, meaning consumers were much more confident about their own financial and employment situations than traders had thought. That is bad news for bonds and mortgage rates because rising confidence is a sign that consumers are willing to spend money and make a large purchase in the near future, fueling economic growth.
Tomorrow has no economic data scheduled that is expected to affect mortgage rates, but we do have the adjournment of the FOMC meeting that begins today. There is little chance the Fed will change key short-term interest rates during this meeting, although it is expected to bring an end to their bond-buying program that was initiated to help stimulate economic growth. Market participants will be looking at the post-meeting statement for any indication of a change in Fed sentiment or possible further hints on when they will make their first rate increase. The meeting will adjourn at 2:00 PM ET tomorrow, so look for any reaction to the statement to come during afternoon hours.
Also worth mentioning is that this week has a couple of Treasury auctions that can influence bond trading enough to impact mortgage pricing. They are tomorrow’s 5-year and Thursday’s 7-year Note sales. If these sales are met with a strong demand from investors, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to slight upward revisions to mortgage rates.