The economic calendar has several releases coming Tuesday morning that could influence both the U.S. Treasury market and mortgage rates.
At the moment, our live market dashboard shows Treasury yields near 4.24% for the 2-year, 4.43% for the 5-year, 4.74% for the 10-year and 5.27% for the 30-year Treasury, while the Mortgage Market Update shows the average 30-year fixed mortgage rate around 6.78%.
What happens next will depend partly on whether the economic numbers arriving Tuesday are stronger or weaker than markets currently expect.
The key is not simply whether a number is “good” or “bad.” Financial markets generally react to the difference between the Actual number and the Forecast already built into expectations.
Building Permits
Forecast: 1.443 million
Building permits provide a forward-looking indication of residential construction activity.
If permits come in higher than forecast, that would suggest greater housing and economic activity than expected. All else equal, stronger growth can put some upward pressure on Treasury yields.
That could mean:
Treasury yields: ↑ Potentially higher
Mortgage rates: ↑ Potentially higher
If permits come in below forecast, it would suggest softer housing activity.
That could mean:
Treasury yields: ↓ Potentially lower
Mortgage rates: ↓ Potentially lower
Housing data usually does not move the bond market as dramatically as employment or inflation data, but a significant surprise can still matter.
ADP Employment Change
Employment data is especially important because the Federal Reserve closely watches the labor market when evaluating monetary policy.
If employment growth comes in stronger than expected, markets may conclude that the economy can tolerate higher interest rates for longer.
Generally:
Stronger employment:
Treasury yields ↑
Mortgage rates ↑
If employment growth is weaker than expected, the market may see additional evidence that the labor market is cooling.
Generally:
Weaker employment:
Treasury yields ↓
Mortgage rates ↓
Large surprises tend to matter much more than small deviations from expectations.
S&P/Case-Shiller Home Price Index
The calendar also includes the S&P/Case-Shiller Home Price Index.
The current comparison shown on our dashboard includes approximately:
Year-over-year: Forecast 1.8% versus 1.6% previously
Month-over-month: Previous reading approximately 0.9%
Stronger-than-expected home-price appreciation can reinforce the idea that household wealth and housing inflation remain resilient.
A substantially hotter number could therefore be mildly negative for bonds:
Higher than forecast:
Treasury yields ↑
Mortgage rates ↑
A weaker housing-price reading could point toward cooling demand and less inflation pressure:
Lower than forecast:
Treasury yields ↓
Mortgage rates ↓
This report normally matters less than CPI, PCE or major employment releases, but it becomes more important when markets are particularly focused on housing and inflation.
Consumer Confidence
Consumer Confidence currently carries a reading near 90.3, compared with approximately 90.8 previously on the feed.
This indicator gives markets a sense of how consumers feel about economic conditions and their willingness to spend.
A reading well above expectations may indicate a more resilient consumer and stronger future economic activity.
That tends to favor:
Treasury yields: ↑
Mortgage rates: ↑
A reading below expectations can suggest weakening consumer momentum.
That tends to favor:
Treasury yields: ↓
Mortgage rates: ↓
Because consumer spending represents such a large portion of U.S. economic activity, a meaningful confidence surprise can influence rate expectations.
New Home Sales
The dashboard currently shows a forecast of approximately 620,000 annualized new-home sales, versus approximately 628,000 previously.
If sales substantially exceed 620,000, markets could interpret that as another sign that housing demand remains resilient despite elevated borrowing costs.
A stronger report would generally lean toward:
Treasury yields: ↑
Mortgage rates: ↑
A weaker-than-expected number would point toward slower housing activity:
Treasury yields: ↓
Mortgage rates: ↓
The month-over-month change should also be watched because it can reveal whether the direction of housing activity is accelerating or deteriorating.
The 2-Year Treasury Auction
Later in the day, the Treasury will hold a 2-year note auction.
This is different from a normal economic report.
For Treasury auctions, the market pays particular attention to the level of investor demand. Strong demand for the notes can help support bond prices and yields, while weak demand can pressure Treasury prices lower and yields higher.
A strong auction would generally be favorable for rates:
Treasury prices: ↑
Treasury yields: ↓
Mortgage rates: Potentially ↓
A weak auction could work in the opposite direction:
Treasury prices: ↓
Treasury yields: ↑
Mortgage rates: Potentially ↑
Professional traders will look beyond the auction yield itself and examine factors such as bidding strength and investor participation.
How to Read Tuesday’s Dashboard
The most important thing to watch Tuesday morning is the relationship between the three columns at the top of this page.
- Economic Data
Watch the Actual number as each report is released and compare it with Forecast and Previous.
- U.S. Treasury Yields
Then watch the Treasury Yield panel.
If several economic releases come in stronger than forecast and Treasury yields begin moving higher, the bond market is signaling that investors view the data as supportive of stronger growth, persistent inflation or higher-for-longer interest rates.
If the numbers disappoint expectations and Treasury yields fall, investors may be pricing in slower economic growth and potentially easier monetary policy.
- Mortgage Market Update
Finally, watch the Mortgage Market Update.
Mortgage rates do not move tick-for-tick with Treasury yields, but Treasury yields—particularly intermediate and longer-term yields—are an important influence on mortgage-backed securities and mortgage pricing.
That means a sustained move lower in Treasury yields can create an environment favorable to lower mortgage rates, while a sustained rise in yields can put upward pressure on mortgage pricing.
The Combination Matters More Than Any Single Number
One report rarely tells the entire story.
For example, Tuesday could produce:
Weak housing data + weak confidence + strong Treasury auction
That combination would generally be favorable for bonds and could put downward pressure on yields and mortgage rates.
But we could instead see:
Strong employment + stronger housing + strong consumer confidence
That combination would reinforce the argument that the economy remains resilient and could push Treasury yields and mortgage rates higher.
There can also be mixed days where some reports are stronger and others weaker. In that situation, markets will decide which information carries the greatest implications for economic growth, inflation and Federal Reserve policy.
Watch the Three Panels Together
That is why our Market Intelligence Center displays these three pieces of information side-by-side:
Economic Data — What just happened?
Treasury Yields — How is the bond market reacting?
Mortgage Rates — What is happening to borrowing costs?
The numbers themselves are valuable.
Understanding how they interact is where the real intelligence begins.
Market reactions are influenced by many factors, and the directional scenarios above are not guarantees. Treasury yields and mortgage rates can sometimes move differently than an individual economic release might suggest because markets are simultaneously processing inflation expectations, Federal Reserve policy, global events, Treasury supply, investor positioning and other information.