Updated on October 21, 2021 10:06:55 AM EDT
Yesterday afternoon’s scheduled events were not exactly bond friendly. The 20-year Treasury Note auction drew a weak demand from investors compared to other recent sales. When results of the sale were posted at 1:00 PM ET, we saw a negative reaction in bonds. Fortunately, it was not enough of a move to cause an upward change in rates, but today’s pricing reflects that move.
The Fed Beige Book that was posted at 2:00 PM ET reminded traders about rising inflation. There were both positive and negative tidbits in the report. Business contacts in the Fed regions reported modest to moderate economic growth for the most part, but rising prices, worker shortage and supply chain issues are concerning and may restrict growth in the future. In short, there were no major surprises in the report. Therefore, we did not see a noticeable reaction to it in the bond and mortgage markets.
Last week’s unemployment update started today’s batch of economic releases at 8:30 AM ET. It revealed 290,000 new claims for unemployment benefits were filed last week, down from the previous week’s revised 296,000. A decline in initial filings is considered a sign of strength in the employment sector, making the number bad news for mortgage pricing. However, this was a minor variance from the 300,000 forecasts and comes in a weekly snapshot. This has prevented a stronger reaction this morning.
Septembers Existing Home Sales report was released at 10:00 AM ET. The National Association of Realtors announced a 7.0% jump in home resales last month, giving us a sign of strength in the housing sector. Because housing strength makes broader economic growth more likely, we should consider the data to be unfavorable for bonds and mortgage rates.
Also posted late this morning was Septembers Leading Economic Indicators (LEI) from the Conference Board. They came in with a 0.2% rise when forecasts were calling for a 0.5% increase. The weaker reading means the indicators are pointing towards slower than thought economic activity over the next several months. As with most data that shows weaker economic activity, this report was good news for rates.
Tomorrow does not have anything of importance scheduled. Fed Chairman Powell will be speaking at 11:00 AM ET, but the topic does not appear to be something that will influence mortgage rates. That said, his words have the potential to be a market mover at any time. This means we will be watching for any surprises.
©Mortgage Commentary 2021