Tuesday’s bond market has opened in negative territory despite the lack of relevant economic news or noticeable move in stocks. The major stock indexes are flat with the Dow down 2 points and the Nasdaq down 5 points. The bond market is currently down 6/32, but I am not expecting to see much of a change in this morning’s mortgage rates.
This morning’s bond losses have pushed the benchmark 10-year Treasury Note yield up to 2.44%. That is a point of concern for mortgage shoppers because 2.44% acted as such a strong resistance level for quite a while. If it moves back above that threshold, it likely will move closer to 2.50% and possibly above. Since mortgage rates tend to track bond yields, we would like to see the 10-year yield move lower without breaking above.
Tomorrow has the first of this week’s relevant economic data and it is a big one. August’s Retail Sales data will be posted at 8:30 AM tomorrow. This report comes from the Commerce Department and will give us a very important measurement of consumer spending. Consumer level spending figures are extremely relevant to the markets because they make up over two-thirds of the U.S. economy. Current forecasts are calling for a 0.3% increase in sales. Analysts are also calling for a 0.3% rise in sales if more volatile auto transactions are excluded. Larger than expected increases would be considered bad news for bonds and likely lead to an increase in mortgage pricing since it would indicate stronger economic growth.
Also tomorrow is the first of this week’s two Treasury auctions that have the potential to influence mortgage rates. 10-year Treasury Notes will be sold tomorrow, followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, the earlier losses are usually recovered after the results are announced. Results of sales will be posted at 1:00 PM ET of each auction day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading those days. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.