Monday’s bond market has opened down slightly despite a much weaker than expected housing report. The stock markets are posting minor gains with the Dow up 25 points and the Nasdaq up 5 points. The bond market is currently down 2/32, but we will still likely see an increase in this morning’s mortgage rates of approximately .125 - .250 of a discount point due to weakness late Friday.
The National Association of Realtors reported late this morning that home resales fell a whopping 16.7% last month. Analysts were expecting to see a sizable decline in sales, but this was much larger than thought. The surprising drop indicates that the housing sector still is not stable, which is good news for the bond market and mortgage rates. Some of the loss is being attributed to the initial expiration of the home buyer tax credit, but I don’t believe many analysts are blaming the entire loss on that factor. This raises further concerns about the housing sector and makes a broader economic recovery less likely to be in the near future.
The rest of the week is extremely busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates. There are six more relevant economic releases scheduled for the week in addition to a Federal Open Market Committee (FOMC) meeting.
January’s Consumer Confidence Index (CCI) will be released late tomorrow morning. This report is considered to be of high-importance to the bond market and therefore can move mortgage rates. It is an indicator of consumer sentiment, which is important because a decline would be construed as a sign that consumers may be less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. A reading smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.
And if we didn’t have enough to watch already, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Wednesday and Thursday, respectively. If they are met with a strong demand from investors, the broader bond market may rally during afternoon hours those days. However, a lackluster interest in the sales could lead to bond selling and higher mortgage rates.
Source: Ken Mason, Mortgage California