Updated on February 28, 2024 10:26:55 AM EST
Yesterday’s 7-year Treasury Note auction went a little better than Tuesday’s sale with the benchmarks showing an above average demand for the securities compared to other recent sales. Bonds initially made a positive move after results were posted at 1:00 PM ET but gave up those gains shortly after. The move wasn’t strong enough to cause an intraday change in mortgage rates, causing us to label the event as neutral for rates.
The first revision to the 4th Quarter Gross Domestic Product (GDP) reading was posted at 8:30 AM ET this morning. It showed the economy grew at a 3.2% annual rate, slightly slower than the initial estimate of 3.3% that was announced last month. This matched expectations, preventing much of a response in the bond market or mortgage rates. The downward revision is technically favorable for bonds by theory, but since the data is a bit aged now (Oct - Dec), traders are more interested in what is coming tomorrow.
Tomorrow brings us two early morning releases, one of which is much more important than the other. Januarys Personal Income and Outlays report is the more influential of the two. This data gives us an indication of consumer ability to spend and current spending habits. Current forecasts call for a rise in income of 0.5% while spending is expected to have risen 0.2%. Rising income means consumers have more money to spend. And stronger levels of consumer spending help fuel overall economic growth, making long-term securities such as mortgage-related bonds less attractive to investors. This report also contains a key inflation reading that the Fed relies on during their FOMC meetings (PCE). Accordingly, good news for rates would be weaker numbers.
We will also get last week’s unemployment figures tomorrow morning. They are expected to show 206,000 new claims for unemployment benefits were filed, up from the previous week’s 201,000. Rising claims are a sign of weakness in the employment sector, meaning a larger number would be good news for mortgage rates. However, this is just a weekly snapshot and is being released at the same time a very influential inflation reading will be posted. The PCE index will draw much more attention and have a stronger impact on tomorrow’s rates than this weekly data.
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