Updated on May 19, 2022 10:06:29 AM EDT
Yesterday’s 20-year Treasury Bond auction was mostly uneventful. The benchmarks we use to gauge investor demand showed a slightly better than average interest in the sale compared to recent similar auctions. Bonds responded favorably after results were posted at 1:00 PM ET. However, they were already gaining momentum between morning pricing and the time results were announced. In other words, the sale did nothing to derail the rally but was not the reason for it.
Last week’s unemployment figures revealed 218,000 new claims for benefits were filed during the week. This was higher than expected and a somewhat noticeable increase from the previous week’s revised 197,000 initial filings. Accordingly, we can consider the numbers to be favorable for bonds and mortgage rates even though they haven’t had a strong impact on this morning’s pricing.
Aprils Leading Economic Indicators (LEI) from the Conference Board was one of this morning’s two late releases. It came in with a 0.3% decline compared to the unchanged that analysts were expecting. The decline means the indicators are pointing towards slower economic activity over the next several months. Since bonds tend to thrive in weaker economic conditions, we can label this report as favorable for mortgage rates.
The week’s final report came from the National Association of Realtors, who said home resales fell 2.4% last month, nearly matching forecasts. Declining sales is good news because a weakening housing sector makes broader economic growth much more difficult.
There is nothing of importance scheduled for release tomorrow. We can expect stock movement to help drive bond trading and changes to mortgage rates. Generally speaking, stock losses are good news for bonds. As stock selling accelerates, investors tend to move funds into bonds as a safe-haven from the volatility. That causes bond prices to rise and yields to move lower, translating into improvements to mortgage rates. If stocks rebound tomorrow, we could see bonds give back some of today’s gains and mortgage rates to move a little higher.
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