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Wednesday’s bond market has opened in negative territory as traders prepare for today’s debt sale. The stock markets are calm but slightly in positive ground with the Dow up 26 points and the Nasdaq up 14 points. The bond market is currently down 7/32, but due to strength in trading late yesterday we should still see an improvement of approximately .125 of a discount point in this morning’s rates if comparing to Tuesday’s early pricing.
There is no relevant economic data being posted this morning that is likely to influence mortgage rates. Look for stock movement to drive bond trading and mortgage rates until we get to this afternoon’s activities. If the major stock indexes move higher, the safe bet would be bond weakness and a potential increase in rates. On the other hand, stock selling will probably lead to bond buying and slightly lower mortgage rates.
We have two relevant events taking place this afternoon that are worth watching. The first are the results of today’s 10-year Treasury Note auction at 1:00 PM ET. If investor demand for the securities was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If interest was weak, bonds will probably move lower early this afternoon, pushing yields and mortgage pricing higher. Today’s sale will be followed by a 30-year Bond auction tomorrow with results also being posted at 1:00 PM.
The second event of the day is the release of the minutes from the last FOMC meeting. Market participants will be looking at them closely as they give us insight to the Fed’s current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release, particularly about inflation, economic conditions or their current bond buying program, could cause afternoon volatility in the markets tomorrow and possible changes in mortgage pricing. This is one of those releases that could create a sizable move in the financial and mortgage markets or completely be a non-factor.
Tomorrow’s only worthwhile economic data is the weekly unemployment update at 8:30 AM ET. It is expected to show that 325,000 initial claims for unemployment benefits were filed last week. This would be a slight decline from the previous week’s 326,000 new claims, indicating that the employment sector was flat. Ideally, bond traders would prefer to see a sizable increase in claims, so the larger the number, the better the news it is for the bond market and mortgage rates. However, this is only a narrow weekly snapshot of the sector. Therefore, it usually takes a wide variance from forecasts for the data to move mortgage pricing.