BONDS RALLY ON WEAK ECONOMIC DATA

Durable Goods Orders were down more than expected at +0.1% (expectations were +3.0%). This is bond-friendly news as is signals a potential slow down in the manufacturing sector. When the revised numbers from this report are released in roughly two weeks, this sentiment could change or be reinforced.

Jobless claims were also up just slightly higher than expected. 349k as opposed to 343k. This isn't enough in and of itself to have an impact on rates, but the tepid reading fails to mitigate the impact of other reports.

One report that is mitigating the positive impact on the bond market is the consumer confidence report which came in at a higher than expected 88.6 (expected at 86.5). Strong consumer confidence means strong spending, which means strong economy, which means investors put money in stocks rather than bonds, which means bond prices go down, which mean mortgage rates go up.

As a result of all this info, bond prices are up this morning, countering a reasonable amount of the losses after yesterday's weakly bid 2 year treasury auction. 5.5% FNMA 30 yr coupon currently bid at 98 and 30/32nds. Mortgage rates should be slightly better than yesterday afternoon, closer to those of yesterday morning.

30 YEAR FIXED PAR NOTE RATE: 5.75%-5.875%

Lock Comment: Weak bidding on the 2 year treasury auction yesterday led to some weakness in the entire bond market. There is another auction today at 1pm EST. It should be a relatively safe risk to float until then, but keep an eye on the economic news. If the 5 year auction in weakly bid, lock ASAP.