Monday’s bond market has opened in positive territory, extending Friday’s momentum. The stock markets are starting the week mixed but fairly calm with the Dow down 1 point and the Nasdaq up 11 points. The bond market is currently up 9/32 (2.47%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
There is nothing of importance set for release today. In fact there isn’t too much scheduled the entire week. With a light calendar of events to drive trading, we will be watching stocks and technical factors in the bond market for mortgage rate direction. The benchmark 10-year Treasury Note yield is below 2.50% again, making 2.44% our next focal point. I can see the 10-year yield drifting towards that level (bringing mortgage rates lower also) as long as there are no surprises such as stock strength or geopolitical resolutions. However, that appears to be a pretty strong level of resistance, meaning without a significant event to push below, yields and mortgage rates will likely change direction. I don’t necessarily think there is a high risk of rates spiking higher the next several days, but the potential gain versus the possible risk doesn’t justify across the board float recommendations, in my opinion.
June’s Factory Orders data is the first data of the week at 10:00 AM ET tomorrow. This report helps us measure manufacturing sector strength by tracking orders for both durable and non-durable goods during the month of June. It is similar to the Durable Goods Orders report that tracks orders for big-ticket items only, which was posted late last month. Since a significant portion of the data was released then, this report likely will not have much of an impact on the markets. Analysts are expecting to see an increase in new orders of approximately 0.5%. A smaller than expected increase would be considered good news for bonds and mortgage pricing, but I don’t believe this report will have a significant impact on Tuesday’s mortgage rates either way.
The Institute for Supply Management (ISM) will post their Services Index for July late tomorrow morning also. This index is somewhat similar to last Friday’s ISM Manufacturing Index but tracks sentiment at the services level rather than manufacturing. It has the potential to impact bond trading and mortgage rates if it shows a sizable variance from forecasts, particularly when little other data is being posted. However, it usually has little influence on mortgage pricing and cannot be considered a key report. Current forecasts are calling for a reading of 56.5, up from June’s reading of 56.0.
Overall, any day of the week could end up being the most active with such little on the calendar. Tomorrow has two reports so we can label it as the best candidate for most active, although a sizable move in stocks could cause a larger move in rates than these reports are likely to do. I am not expecting to see nearly as much volatility in rates this week as we saw last week, but there still is a decent chance of seeing rates move multiple days.