Tuesday’s bond market has opened in negative territory again with little to drive trading today. Stocks are not helping the cause with the major indexes extending yesterday’s late rally. The Dow is currently up 75 points while the Nasdaq has gained 25 points. The bond market is currently down 7/32 (1.92%), which should push this morning’s mortgage rates higher by approximately .250 of a discount point if comparing to Monday’s morning pricing.
There is nothing of importance set for release today. This leaves bonds to the mercy of stock gains and profit-taking from last week’s rally. There isn’t much scheduled this week to push bonds one way or another, so don’t be surprised to see other days just like this. Drifting aimlessly is a good phrase to use in this circumstance.
Tomorrow has two events that have the potential to affect mortgage rates, both coming during afternoon hours. The first is the 10-year Treasury Note auction. This is the first of the week’s two auctions we will be watching. It will be followed by a 30-year Bond sale Thursday. It is common to see some weakness in bonds ahead of the sales as participating firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing tomorrow and/or Thursday afternoon.
Also tomorrow afternoon 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 when the first rate hike will take place, could cause afternoon volatility in the markets and possible changes in mortgage pricing tomorrow. This is one of those reports that can cause a great deal of volatility or actually be a non-factor, depending if there are any surprises.