Santa Fe Las Campanas Market Update

 Monday’s bond market has opened has opened in negative territory due to a strong opening in stocks. The major stock indexes are kicking the week off with a rally that has pushed the Dow up 103 points and the Nasdaq up 28 points. The bond market is currently down 6/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.
Today’s only economic data was May’s Personal Income and Outlays data that revealed a 0.3% rise in income and no change in spending. The income reading matched forecasts but the spending portion of the report was slightly below expectations. That makes the data neutral-to-positive for bonds and mortgage rates. Unfortunately, the stock market rally is preventing much of an impact on today’s pricing.
The remainder of the week brings us three more relevant economic reports, along with two Treasury auctions that may influence mortgage rates. The next will be posted late tomorrow morning when the Conference Board releases June’s Consumer Confidence Index (CCI). This data is important to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial situations, they are likely more apt to make large purchases in the near future. If it shows a sizable increase in confidence from last month, we can expect to see the bond market falter and mortgage rates rise slightly. Current forecasts are calling for a reading of 60.3, down from last month’s 60.8 reading. The lower the reading, the better the news for bonds and mortgage rates.
Tomorrow also has the first of this week’s two relevant Treasury auctions that we need to watch. 5-year Notes will be sold tomorrow and 7-year Notes will be auctioned Wednesday. These sales may influence trading enough to affect mortgage rates. The more important of the two is the 7-year Note sale, but since tomorrow’s is close in term we could see the bond and mortgage markets react to it also. Results will be posted at 1:00 PM ET, so any reaction will come during afternoon hours. If they are met with a strong demand, we could see bond prices rise during afternoon trading, leading to afternoon improvements in mortgage rates. But, if the sales draw a lackluster interest from investors, mortgage rates may move higher during afternoon trading those days.
Overall, Friday’s ISM report is definitely the most important of the week, but tomorrow’s CCI can also impact mortgage rates. Next Monday is when the Independence Day holiday will be recognized. There is no early close for the bond market Friday ahead of it, but it will probably be a light afternoon in trading as traders head home for the long weekend. This could lead to additional volatility during morning trading, particularly if the ISM report shows a surprise.