Thursday, September 24, 2020
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Updated on September 24, 2020 10:04:54 AM EDT

Yesterday’s 5-year Treasury Note auction was uneventful with the benchmarks we use to gauge investor demand showing an average level of interest in the securities. The bond market and mortgage pricing had no reaction to the auction results. That leads us to be cautiously optimistic about today’s 7-year Note sale. Results of it will be posted at 1:00 PM ET, meaning if rates react to it, it will happen during early afternoon trading. A strong sale would be considered favorable news for rates even though we are likely to see an insignificant move in rates at best.

This morning’s first piece of economic data was last week’s unemployment figures at 8:30 AM ET. They showed that 870,000 new claims for benefits were filed last week, up from the previous week’s revised 866,000. However, forecasts were calling for a decline to 840,000 new filings. The slight increase and higher than expected number of claims indicate the employment sector was weaker than thought last week, making the data good news for bonds and mortgage rates.

Also released this morning was August’s New Home Sales report. The Commerce Department announced that sales of newly constructed homes rose 4.7% last month when they were expected to decline. That increase signals a stronger than expected new home portion of the housing sector, making the data unfavorable for mortgage rates. However, this report tracks such a small percentage of all home sales in the U.S. that it does not draw much attention. This morning’s unemployment update carries more significance in the markets, allowing bonds to react to that data instead of the housing news.

Fed Chairman Powell will finish his three consecutive days of congressional testimony today, speaking to the Senate Banking Committee. His first two appearances failed to move bonds or mortgage rates, although we did see stocks go into selling mode yesterday afternoon. Unfortunately, the selling wasn’t of much help to the bond market like we saw earlier in the week. It is unlikely that today’s appearance will influence mortgage rates, but there is always a possibility when the chairman is speaking publicly.

The week’s calendar closes tomorrow with the release of Augusts Durable Goods Orders report at 8:30 AM ET. This release will give us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Big-ticket products are items that are expected to last three or more years such as airplanes, electronics and appliances. Analysts are expecting to see a 1.2% rise in new orders, pointing towards strength in the manufacturing sector. A sizable decline should help boost bond prices and cause mortgage rates to drop tomorrow because signs of economic weakness make longer-term securities more appealing to investors. However, a much larger than expected increase in new orders will likely help push mortgage rates higher. It is worth noting that this data is known to be quite volatile from month-to-month, so a slight or moderate variance may not affect mortgage pricing like it may in other reports.

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