Mel's Blog

July 09 Market News #13

July 29th, 2009 2:37 PM by Mel Samick


Tuesday's bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning's mortgage rates.

The Conference Board gave us today's important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.

Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June's Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.

The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meeting s. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke's testimony to Congress last week gave us a recent update, I don't think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow's 5-year and Thursday's 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday's sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.

                                Mel

Posted in:General
Posted by Mel Samick on July 29th, 2009 2:37 PM

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