Mortgage interest rates got a nice little nudge to lower levels as investors reacted to this morning's sharply lower than anticipated reading for September consumer confidence. This measure of consumer sentiment posted its third decline in the last four months and easily wiped-out the August gain.
The size of the decline in consumer confidence has increased concerns among credit market participants that the U.S. may yet face the threat of a double dip recession. The data clearly indicates consumers remain depressed about their financial prospects and view current economic conditions as inescapably recessionary.
The good news here is that this data is definitely supportive of steady to perhaps fractionally lower mortgage interest rates. The bad news is as long as consumers remain in their foxholes with their helmets on and their heads down -- the number of prospective borrowers interested and/or capable of initiating transactions featuring record all-time low mortgage rates will continue to shrink.
Investors will now turn their attention to this afternoon's five-year Treasury auction, the second of three Treasury note sales scheduled for this week.
Most analysts are anticipating good foreign participation at this afternoon's $35 billion 5-year note sale, particularly from Japan's central bank as they move to recycle their recent currency intervention reserves into dollar denominated assets like Treasury obligations and agency eligible mortgage-backed securities. Renewed financial concerns regarding the fiscal viability of Portugal and Ireland will likely serve as a catalyst to drive capital into the comparatively safe-harbor of U.S. government debt as well.
A well bid 5-year note auction will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. The auction will conclude at 1:00 p.m. ET -
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