Wednesday’s bond market has opened in negative territory despite a lack of relevant economic data and a calm but mixed open in stocks. The Dow is down 12 points while the Nasdaq has gained 7 points. The bond market is currently down 10/32 (2.16%), but we should see little change in this morning’s mortgage rates if comparing to Tuesday’s early pricing. This is because strength in bonds late yesterday caused some lenders to improve rates slightly during afternoon trading. The net result is rates being very close to yesterday morning’s pricing.
Today’s only worthwhile event is the first of this week’s two Treasury auctions that have the potential to influence mortgage rates. The Treasury is selling 5-year Notes today and 7-year Notes tomorrow. They will tell us if there is an appetite in the markets for medium-term securities. If investor demand in these sales is strong, particularly from international buyers, the broader bond market should move higher, pushing mortgage rates lower. But a lackluster interest from investors could lead to bond selling and higher mortgage pricing. The results of the sales will be announced at 1:00 PM ET each day, so any reaction to the results will come during early afternoon trading.
There are three pieces of economic data set for release tomorrow morning. The first is the least important of the group when last week’s unemployment numbers will be posted at 8:30 AM ET. They are expected to show that 271,000 new claims for unemployment benefits were filed last week. The previous week had 264,000 initial claims, so analysts are expecting to see a rise in claims. Ideally, we would like to see a sizable increase in new claims, indicating employment sector softness. The higher the number of new claims, the better the news it is for mortgage rates. However, since this is only a weekly report, it usually takes a wide variance from forecasts for this data to affect mortgage pricing. And since it precedes two other reports, there is an even less chance of them being a factor in tomorrow’s mortgage rates.
August’s Durable Goods Orders will also be released at 8:30 AM ET, which is this week’s most important report. This report gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Big-ticket products are items that are expected to last three or more years such as electronics and appliances. Analysts are expecting to see a decline in new orders, indicating weakness in the manufacturing sector. A larger decline than the 2.0% that is being forecasted should help boost bond prices and cause mortgage rates to drop Thursday because signs of economic weakness make longer-term securities more appealing to investors. However, an increase in new orders would indicate a stronger than expected manufacturing sector that would likely help push mortgage rates higher. It is worth noting that this data is known to be quite volatile from month-to-month, so a slight or moderate variance may not affect mortgage pricing.
The third release of the day will be August’s New Home Sales at 10:00 AM ET. The Commerce Department is expected to say that sales of newly constructed homes rose last month, indicating strength in the new home portion of the housing sector also. This report will likely not have a noticeable impact on mortgage rates unless its readings differ greatly from forecasts. This is the week’s least important monthly report in terms of potential impact on mortgage rates, partly because it covers only the small portion of all homes sales that Monday’s Existing Home Sales report did not.