Rates Even Despite Worse Jobless Claims, Pending Home Sales, Manufacturing Orders

Rates are about even today after rising yesterday, and 30yr rates are about 4.875%. Yesterday, December’s New Home Sales showed a 17.5% increase in single-family home sales (way more than 3.1% expected), the Fed said the economy is still struggling, and there was a well-received 5-yr Treasury auction. The Fed announcement should have offset the New Home Sales report and Treasury auction for rates to be even, but markets overreacted like movie characters often do.

Today rates dropped back down after weaker jobs, home sales and manufacturing data, and also a strong appetite for bonds in general—rates are tied to mortgage bonds and rates drop when bond prices rise on buying. Here’s a quick summary of the day’s data: (1) jobless claims for the week increased 51,000 to 454,000, (2) manufacturer orders for durable goods lasting more than 3 years were down 2.5%, (3) Pending Home Sales, a forward-looking indicator, increased 2% based on contracts signed in December but decreased 4.2% since December 2009. The data reflects contracts and not closings, which normally occur with a lag time of one or two months, and (4) a well-received $29b auction of new 7yr Treasury notes that put all bond markets in a buying mood.