Updated on April 25, 2019 10:19:03 AM EDT
Yesterday’s 5-year Treasury Note auction went pretty well with several benchmarks showing a decent level of interest in the securities. However, it wasn’t strong enough to cause much movement in bonds or mortgage rates. The results do allow us to remain optimistic about today’s 7-year Note sale. Results will also be posted at 1:00 PM ET. An overly strong demand from investors could help boost bonds this afternoon, possibly leading to a slight improvement in mortgage rates.
Today’s big news was Marchs Durable Goods Orders at 8:30 AM ET. The Commerce Department announced a 2.7% increase in new orders for big-ticket products. This was larger than the 0.8% that was expected, indicating manufacturing activity was stronger than thought. Because stronger manufacturing activity is a sign of economic strength, the data is bad news for bonds and mortgage rates. Since this data is known to be volatile from month to month, the size of the variance is not nearly as important as it would be in many other reports. That has helped limit the impact on this morning’s mortgage rates.
Last week’s unemployment figures gave us favorable results, showing that 230,000 new claims for benefits were filed last week. That was up from the previous week’s revised 193,000 initial filings and higher than the 215,000 that was expected. However, this being only a weekly snapshot makes it less influential than most of the other reports we get. Accordingly, we are seeing little reaction to it in this morning’s rates.
Tomorrow has two reports set to be posted, one of which is a major release. The big news will be the preliminary version of the 1st Quarter Gross Domestic Product (GDP) at 8:30 AM ET. There is a strong argument to be made that this is the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measure of economic growth or contraction. It has the potential to cause noticeable movement in the financial markets and mortgage rates. Market participants are expecting it to show that the economy grew at an annual rate of 1.9% during the first three months of this year. That would be a slower pace than the 2.2% pace of the final quarter of last year. A weaker rate of growth would be considered good news for mortgage rates. But a stronger than expected reading would almost certainly cause stock prices to rise and bond prices to fall, leading to higher mortgage rates tomorrow.
The week closes with the University of Michigans revised Index of Consumer Sentiment for April just before 10:00 AM ET tomorrow. This report gives us an indication of consumer sentiment and their willingness to spend. Current forecasts are calling for little change from the preliminary reading of 96.9. This means that surveyed consumers were no more or less optimistic about their own financial situations as they were earlier this month. This data is relevant because rising confidence in their own financial situations usually means consumers are more apt to make a large purchase in the near future. Since consumer spending makes up approximately 70% of the U.S. economy, related data is watched fairly closely. I dont expect this report to have a significant impact on bonds and mortgage pricing unless it shows a noticeable revision.
©Mortgage Commentary 2019