Tuesday’s bond market has opened well in positive territory as stocks look to give back yesterday’s gains, making bonds more attractive to investors. The Dow is currently down 166 points while the Nasdaq has lost 30 points. The bond market is currently up 23/32 (2.15%), which should improve this morning’s mortgage rates by approximately .250 of a discount point.
Today’s only economic data was the 2nd Quarter Employee Productivity and Costs at 8:30 AM ET. It showed a 1.3% increase in productivity, falling just short of the 1.4% that was expected. The Labor Costs reading came in stronger than forecasted, making the data slightly negative for bonds and mortgage rates. However, that hasn’t prevented bonds from moving higher this morning.
Also affecting bond trading this morning was an unexpected monetary policy move by China that is having a global currency and economic impact. The move was made to boost economic activity in China and their financial markets, but is being taken as a negative here in the U.S. The result is stocks losing ground and funds shifting into bonds.
Tomorrow doesn’t have any relevant economic data scheduled for release but we do have an afternoon event that may affect bond trading and mortgage rates. The first of this week’s two relevant Treasury auctions will be taking place tomorrow. 10-year Treasury Notes will be sold tomorrow, followed by a 30-year Bond auction Thursday. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading tomorrow. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher. Results of the sale will be posted at 1:00 PM ET tomorrow, so any reaction will come during early afternoon trading.