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Monday’s bond market has opened fairly flat with nothing of significance taking place to drive trading. The stock markets are mixed but calm with the Dow down 23 points and the Nasdaq up 8 points. The bond market is currently nearly unchanged from Friday’s close, but we may still see a slight improvement in this morning’s mortgage rates if comparing to Friday’s morning pricing.
There is no relevant economic data or other events taking place today that are likely to influence mortgage rates. If we see an intra-day revision in mortgage pricing, it will likely have come from a noticeable move in stocks. If the major stock indexes move higher, we could see pressure in bonds that lead to an upward change in mortgage rates. However, if stocks go into selling mode, bonds should benefit, lowering mortgage rates later today. If the major stock indexes remain near current levels, I suspect mortgage rates will follow suit.
The rest of the week brings us the release of three pieces of monthly economic data that is relevant to mortgage rates in addition to two Treasury auctions and semi-annual Fed testimony. All of the economic data is set for release the latter part of the week while the other events will take place during the middle days. One of the economic reports is considered highly important to the markets, but the others are not likely to be market movers. Even with a lack of factual data the first half of the week though, we have other events that are likely to cause a fair amount of volatility in the markets and mortgage rates.
Newly appointed Fed Chairman Yellen will deliver the Fed’s semi-annual testimony on the status of the economy late tomorrow and Thursday mornings. She will be speaking to the House Financial Services Committee tomorrow and the Senate Banking Committee Thursday. Market participants will watch her words very closely. The Fed is required to deliver this testimony twice a year, which is considered to be of extreme importance to the financial markets. We almost always see the markets move as a result of what is said during this testimony. Look for her to address our employment situation, inflation, global financial issues and possibly the Fed’s tapering of QE3 and their impact on the overall economy. Her testimony begins at 10:00 AM ET with a prepared statement which is then followed by Q & A with committee members. Her prepared words are expected to be released at 8:30 AM ET tomorrow, so we could see a reaction early in the morning. I am expecting to see the markets fluctu! ate while this testimony is taking place, possibly affecting mortgage rates also. The first day of testimony usually causes the most volatility because the prepared statement made by the Chairman on the second day often differs little from that of the first day, so tomorrow is more important for the mortgage market than Thursday’s appearance will be.
Overall, I believe tomorrow or Thursday is likely to be the most important days for mortgage rates this week. The calmest is likely to be today with it being the only day without something of relevance scheduled. The afternoon auctions and late morning starting times for the Fed testimony means there is a good likelihood of seeing intraday revisions to mortgage rates multiple days as the markets react to those events.