Updated on July 26, 2024 10:13:41 AM EDT
Yesterday’s 7-year Treasury Note auction went better than Wednesday’s sale. Investor demand was a bit stronger for these securities than the 5-year Notes. Bonds improved slightly after results were announced at 1:00 PM ET, but not enough to cause intraday revisions to mortgage pricing. Most lenders appear to have chosen to reflect that move in this morning’s pricing rather than changing them late yesterday.
This morning’s big news was June’s Personal Income and Outlays report. It showed that income rose 0.2% while spending was up 0.3%. Both of these readings were lower than expected, meaning consumers had less money to spend and spent less than thought. This is good news for bonds and mortgage rates because weaker spending limits fuel for economic growth.
What the markets were more interested in was the inflation readings within the report. The Fed’s preferred inflation gauge- Personal Consumption Expenditures (PCE) index, actually gave more bad news than good. The overall PCE for June rose 0.1% and the annual reading slipped 0.1% to a 2.5% yearly pace, as they were expected to do. Both of the Core PCE monthly and annual readings exceeded predictions by 0.1% (up 0.2% and 2.6% respectively). Since the Fed relies mostly on the core data, we have to label the inflation readings bad news for bonds and mortgage rates. For some reason, and to the benefit of mortgage shoppers, bond traders are opting to ignore this morning’s inflation numbers.
Posted late this morning was Julys revised Index of Consumer Sentiment from the University of Michigan Index. They announced a reading of 66.4 that was a little higher than the initial estimate of 66.0 from two weeks ago. The higher number means more surveyed consumers felt better about their personal financial and employment situations than earlier in the month. Since consumers tend to spend more when they feel good about their own finances, this is also bad news for rates. However, the inflation data was of much more importance to the markets this morning than this report was.
Next week starts light with nothing of importance scheduled Monday and just a moderately important economic report Tuesday morning. Things drastically change Wednesday afternoon when the FOMC meeting adjourns. That will be followed by the start of the highly important new month reports Thursday and Friday morning (ISM manufacturing and Employment reports). Look for details on all of next week’s activities in Sunday evening’s weekly preview.
©Mortgage Commentary 2024