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Tuesday’s bond market initially opened in positive territory but has since
moved into negative ground after digesting this morning’s economic news. The
major stock indexes are showing sizable gains with the Dow up 97 points and
the Nasdaq up 16 points. The bond market is currently down 10/32, but due
to a nice rally in bonds late yesterday, we should still see a small
improvement in this morning’s mortgage rates if comparing to Monday’s
morning pricing.
May's Durable Goods Orders was the first of today’s three reports,
revealing a 3.6% increase in new orders at U.S. factories for big-ticket
items. This was a bit stronger than the 3.0% that was expected, however,
since this data is known to be volatile the amount of the variance was not
significant enough to cause any concern. A secondary reading that tracks
orders excluding larger more volatile transportation-related products such
as new airplanes came in with a 0.7% increase when it was forecasted to
fall 0.5%. Therefore, we should consider the news slightly negative for the
bond market and mortgage rates. Still, the markets are reacting more to the
late morning data than this report.
The second report of the day was May's New Home Sales report at 10:00 AM
ET. The Commerce Department announced a 2.0% rise in sales of newly
constructed homes last month. This was stronger than expected, but also not
enough to draw much interest from bond traders since it covers such a small
percentage of all home sales in the U.S.
June's Consumer Confidence Index (CCI) was the final report of the day and
it is drawing plenty of attention. The Conference Board announced late this
morning that their CCI rose to 81.4 this month, exceeding forecasts and its
highest reading since January 2008. This means more surveyed consumers felt
better about their own financial and employment situations than many had
thought. That makes the data bad news for the bond and mortgage markets because
rising confidence means consumers are more apt to make large purchases in
the near future, fueling economic growth. It is this report that has bond
traders concerned this morning and has led to bond’s falling into negative
ground.
Tomorrow's only economic data is the final reading to the 1st Quarter Gross
Domestic Product (GDP). The GDP is the sum of all products and services
produced in the U.S. and is considered to be the best measurement of
economic growth or contraction. However, this particular data is quite aged
now (covers January through March) and will likely have little impact on
the bond market or mortgage pricing unless it varies greatly from previous
readings. Market participants are looking more towards next month's release
of this quarter's initial GDP reading. Last month's first revision showed a
2.4% rise in the GDP, which is what analysts are expecting to see again. An
increase would be considered negative for rates as it means stronger
economic activity.
Tomorrow also has the first of this week’s two Treasury auctions that have
the potential to affect mortgage-related bonds if they show particularly
strong or weak investor demand. The Treasury will sell 5-year Notes
tomorrow and 7-year Notes Thursday. If they are met with a strong demand,
we could see bond prices rise during afternoon trading. This could lead to
afternoon improvements to mortgage rates also. But, if the sales draw a
lackluster interest from investors, mortgage rates may move higher during
afternoon trading.
If I were considering financing/refinancing a home, I would.... Lock if my
closing was taking place within 7 days... Lock if my closing was taking
place between 8 and 20 days... Lock if my closing was taking place between
21 and 60 days... Lock if my closing was taking place over 60 days from
now...
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