Yesterday's 7-year Treasury Note auction didn't go as well as Wednesday's 5-year Note sale, but still drew an above average demand from investors compared to other recent sales. Bonds initially improved after results were posted before losing ground during late afternoon trading. The impact on mortgage rates was minimal.
December's Personal Income and Outlays data was posted at 8:30 AM ET today, revealing a 0.2% increase in income and a 0.2% decline in spending. The income reading pegged expectations while the spending was a little weaker than the 0.1% decline that was predicted. Also, the PCE inflation index the Fed relies on didn't show any surprises, including the year over year figures. It is easy to attribute this report to the morning's bond losses, but it has had little influence on trading. They were showing weakness during overnight trading.
Closing out this week's calendar was the revised January reading to the University of Michigan's Index of Consumer Sentiment at 10:00 AM ET. It came in at 64.9, up slightly from the previous estimate of 64.6 two weeks ago. The small upward revision means surveyed consumers felt a tad better about their own financial situations. Since rising confidence usually translates into stronger consumer spending numbers that fuel economic growth, we are labeling the report neutral to slightly negative for rates.
Next week starts light with nothing of importance set for Monday, followed by a couple of moderately important reports Tuesday. The week gets extremely busy at that point with the traditional new month releases (ISM index along with ADP and monthly governmental Employment reports). We also have an FOMC meeting taking place that will adjourn Wednesday afternoon. It is safe to say it will be an interesting week for the financial and mortgage markets. Look for details on the scheduled events in Sunday evening's weekly preview.
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