Today's Commentary

Updated on March 26, 2019 10:49:25 AM EDT
Tuesday’s bond market has opened in negative territory with stocks showing strong gains. The major stock indexes are rallying, pushing the Dow up 245 points and the Nasdaq up 77 points. The bond market is currently down 7/32 (2.42%). However, strength late yesterday should prevent an increase in this morning’s mortgage pricing. If you saw an afternoon improvement in rates, you will likely see an increase this morning.

This morning’s economic data was actually favorable for mortgage rates. February's Housing Starts data was released at 8:30 AM ET, revealing a 8.7% decline in new home groundbreakings. This was much lower than expected, hinting at softness in the new home portion of the housing sector. Because weaker housing data means weaker economic activity, this is good news for the bond and mortgage markets. Unfortunately, this is considered to be a minor piece of data, preventing much of an influence on today’s rates.

March's Consumer Confidence Index (CCI) came in much lower than forecasts also. The Conference Board announced a reading of 124.1 that fell well short of the 132.0 that was expected. This was the fifth decline in the past six months, indicating consumer confidence in their own financial situations is waning. That is good news because waning confidence usually means consumers are less likely to make a large purchase that fuels economic growth.

There is no relevant economic data set for release tomorrow, but we do have an afternoon event to watch. In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. The first will be an auction of 5-year Notes tomorrow followed 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.


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