June's New Home Sales report was posted at 10:00 AM ET this morning. The Commerce Department announced that sales of newly constructed homes rose 0.8% last month. The percentage increase indicates stronger than expected sales since analysts were calling for no change from May's level. However, the number of sales matched forecasts. A downward revision to May's sales created the percentage increase, making the news neutral for bonds and mortgage rates.
We also have two afternoon events taking place today. The 5-year Treasury Note auction is first with results coming at 1:00 PM ET. These types of sales will not directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into the bond market. The buying of bonds that follows translates into lower mortgage rates. If we see a reaction, it will come during early afternoon trading.
That takes us to the FOMC meeting adjournment at 2:00 PM ET. This is not a meeting that will include economic projections or a Fed press conference. It is not expected to yield a change to key interest rates. Many analysts believe the Fed will make their next increase to short-term interest rates later this year, not this week. Anything in the post-meeting statement that either confirms or contradicts that theory will cause volatility in the markets. Also of extreme interest is the Fed's plans for their massive balance sheet and when they will start reducing it. This event usually can be a market mover, but unless details on the balance sheet topic are given, I suspect that this particular meeting will not create a great deal of volatility in this afternoon's mortgage rates.
Besides the 7-year Note auction, there are two economic reports scheduled for tomorrow. One is much more important than the other. We will address those in this afternoon's update shortly after the markets have an opportunity to react to the FOMC meeting.
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