Tuesday’s bond market has opened in positive territory, extending yesterday’s big rally. Stocks are fairly calm, but more importantly not rebounding from yesterday’s major sell-off. The Dow and Nasdaq are both currently up 7 points. The bond market is currently up 7/32 (1.34%), which should improve this morning’s mortgage rates by approximately .125 of a discount point if comparing to yesterday’s early pricing.
This week’s economic calendar started late this morning with the release of February's Consumer Confidence Index (CCI). The Conference Board announced a reading of 130.7, up from January’s revised 130.4 but below expectations of 132.0. That indicates surveyed consumers were less optimistic about their own financial situations than many had thought. Because this data is believed to predict future consumer spending trends, we can consider that data favorable for mortgage rates.
Tomorrow has a morning and afternoon event to watch, starting with January's New Home Sales report at 10:00 AM ET. This is the least important report of the week and is the sister report to last week's Existing Home Sales data. It also measures housing sector strength and mortgage credit demand, but usually does not have a significant impact on bond trading or mortgage rates unless it shows a significant surprise because it covers such a small part of all home sales. Tomorrow's report is expected to show an increase in sales of newly constructed homes, hinting at strength in the new home portion of the housing sector. The smaller the number of sales, the better the news it is for bonds and mortgage rates.
In addition to this week's few economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes tomorrow and 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 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.