Thursday’s bond market has opened in positive territory following mixed economic news. Sizable losses in stocks are likely driving this morning’s bond gains. The Dow is currently down 235 points while the Nasdaq has lost 74 points. The bond market is currently up 17/32 (2.09%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
The first of this morning’s three releases was last week’s unemployment numbers at 8:30 AM ET. They showed that 267,000 new claims for unemployment benefits were filed last week, up a little from the previous week’s 264,000 initial claims. The increase is technically favorable news for bonds and mortgage rates, but analysts were expecting to see 271,000. Therefore, the employment sector appears to have been slightly stronger than thought last week, making the data bad news for mortgage pricing. Fortunately, this is only a weekly snapshot and has had little influence on this morning’s rates.
Also at 8:30 AM ET was the Commerce Department’s release of August’s Durable Goods Orders report. It revealed a 2.0% decline in new orders for big-ticket products such as electronics, appliances and airplanes. While the decline indicates softness in the manufacturing sector, it matched forecasts. Since the data is known to be volatile from month to month and still pegged expectations, I have to label this as neutral-to-slightly positive for mortgage rates.
The third and final economic release of the day was August’s New Home Sales report at 10:00 AM ET. The Commerce Department said that sales of newly constructed homes rose 5.7% last month, greatly exceeding the 1.6% increase that was forecasted. This means the new home portion of the housing sector was stronger than many had thought. Therefore, the data is negative news for mortgage rates. However, this is a report that is not considered to be of high importance to the markets, so it has also had a minimal impact on today’s trading and mortgage pricing.
We also have today’s 7-year Treasury Note auction to watch. Yesterday’s 5-year Note sale went pretty well with several benchmarks we use to measure investor interest showing a decent level of demand. That helps us to remain optimistic about today’s sale. If it also brings a good demand, we could see bond prices improve enough this afternoon to cause a slight downward improvement to mortgage rates. On the other hand, a weak level of interest may lead to pressure in bonds and possibly a slight increase to rates. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading.
Tomorrow has two more pieces of economic data being released, but neither is considered to be key or highly important. The first is the second revision to the 2nd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. Since this data is aged now and the preliminary reading of the 3rd Quarter GDP will be released next month, I don’t see this revision having much of an impact on the financial markets or mortgage pricing. The GDP is important because it is the total sum of all goods and services produced within the U.S. and is considered the best measurement of economic activity. It is expected to show that the economy grew at an annual rate of 3.7%, matching last month’s estimate. The lower the number, the better the news it is for mortgage rates. Although it will likely take a significant revision to see a noticeable move in rates.
The second report of the day is the University of Michigan’s revised Index of Consumer Sentiment for September. The preliminary reading that was released earlier this month showed an 85.7 reading. Analysts are expecting to see an upward revision (87.0), meaning consumer confidence was stronger than previously thought. Waning confidence is good news for bonds because consumers that are concerned about their own financial and employment situations are less likely to make a large purchase in the near future, limiting economic growth. Therefore, a lower than expected reading would be favorable news for bonds and should help improve mortgage rates.