Friday’s bond market has opened down slightly as the markets prepare for a long weekend. The major stock indexes are showing minor gains of 31 points in the Dow and 23 points in the Nasdaq. The bond market is currently down 3/32 (1.83%), but we may still see a slight improvement in this morning’s mortgage rates is comparing to Thursday’s pricing due to strength in bonds late yesterday.
Yesterday’s 7-year Treasury Note auction went pretty well but not as good as Wednesday’s 5-year Note sale. We did see bonds improve during afternoon trading yesterday, but I don’t believe that this was a result of the auction. The move was enough for some lenders to revise rates lower intraday, so whether or not you see a slight improvement in rates this morning depends if your lender made that move yesterday afternoon or opted to wait for today’s open to reflect it.
The first of this morning’s two pieces of economic data was the revised 1st quarter GDP reading at 8:30 AM ET. It showed that the economy grew at an annual rate of 0.8% during the first three months of the year. This was an upward revision from the previous estimate of 0.5% but slightly softer than the 0.9% that was expected. The higher rate of economic growth is technically bad news for bonds. However, since the increase came as no surprise and was actually a little lighter than forecasts, we can consider this data neutral towards mortgage rates.
The final report of the week came from the University of Michigan just before 10:00 AM ET when they posted their revised Index of Consumer Sentiment for May. It came in at 94.7, falling a little short of expectations and declining from the preliminary reading of 95.8. This indicates that surveyed consumers were slightly less optimistic about their own financial situations than they were at the last survey. That makes the data good news for bonds and mortgage rates because waning confidence usually translates into weaker levels of consumer spending that limits overall economic growth.
Fed Chair Janet Yellen does speak today when she receives an award at Harvard University, but I don’t believe she will say anything that will move the markets. This is scheduled to take place at 1:15 PM ET, so any reaction will come around then. It is also worth noting that the bond market will close at 2:00 PM ET today ahead of Monday’s Memorial Day holiday. The stock markets will be open a full day today but closed Monday with all markets reopening Tuesday for regular trading hours.
Next week brings us the release of a handful or economic reports, but a couple of them are highly influential to mortgage rates. Tuesday does have data, but not one of these key reports. Look for details on next week’s calendar in Sunday evening’s weekly preview.