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Wednesday’s bond market has opened in positive territory with stocks showing early losses. The Dow is currently down 70 points while the Nasdaq is down 15 points. The bond market is currently up 9/32, which will likely improve this morning’s mortgage rates by approximately .250 of a discount point.
Today has little scheduled in terms of economic data, but we do have the first of two Treasury auctions that have a decent chance of affecting mortgage rates. 10-year Treasury Notes are being sold today while 30-year Bonds will be auctioned tomorrow. The 10-year sale is the more important of the two for mortgage rates as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading today and/or tomorrow. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.
Tomorrow brings us the release of three minor economic reports for the markets to digest, all at 8:30 AM ET. The first is the weekly unemployment update from the Labor Department, who is expected to announce that 330,000 new claims for unemployment benefits were filed last week. This would be a decline from the 336,000 initial claims of the previous week, indicating that the employment sector strengthened since then. The higher the number of new claims, the better the news it is for the bond market and mortgage rates because rising claims points towards a softening labor market.
Next up is September’s Goods and Services Trade Balance report that gives us the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which makes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities’ proceeds are worth more when sold and converted to the investor’s domestic currency. However, its results will not likely directly lead to changes in mortgage rates. Analysts are expecting to see a $39.1 billion trade deficit that would be just slightly higher than the $38.8 billion from August.
The final report of the morning is the release of the 3rd Quarter Productivity reading. It is expected to show a 2.0% increase in worker productivity during the third quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern. However, this data usually has a minimal impact on mortgage rates unless it shows a significant variance from forecasts.