Wednesday’s bond market has opened in negative territory, extending yesterday’s afternoon weakness. The stock markets are showing minor gains, although it is worth noting that the Dow remains above 18,000 after breaking that threshold yesterday. The Dow is currently up 39 points while the Nasdaq has gained 11 points The bond market is currently down 4/32 (2.28%), which with yesterday’s afternoon selling should have this morning’s mortgage rates approximately .250 of a discount point over yesterday’s morning pricing.
The bond market started to weaken yesterday before the 5-year Treasury Note auction results were posted but the selling accelerated after the 1:00 PM ET posting showed weak investor demand in the sale. The result was upward revisions in mortgage rates from many lenders during afternoon trading yesterday. It also gives us little to look forward to in today’s 7-year Note auction. Results of today’s sale will be posted at 11:30 AM ET, so any reaction should come around lunchtime. Another showing of lackluster interest from investors could lead to another upward move in bond yields and mortgage rates.
Today had only one piece of economic data for the markets to digest and it did not give us favorable news. Last week’s unemployment numbers were posted at 8:30 AM ET this morning, showing that 280,000 new claims for unemployment benefits were filed last week, down from the previous week’s 289,000 initial claims. It was also the fourth consecutive decline in filings. The fewer filings indicates a strengthening employment sector and makes the data negative for mortgage rates. Fortunately, this is only a weekly report so its impact on this morning’s bond trading and mortgage pricing has been minimal.
Both the stock and bond markets will close early today ahead of tomorrow’s Christmas Day holiday. Stocks are expected to close at 1:00 PM ET while bonds will trade until 2:00 PM ET. It is a realistic expectation to see a pretty quiet and light volume session as many traders will head home for the holiday before the early closing times. That should keep mortgage rates relatively calm unless something significant and totally unexpected happens. The markets will reopen Friday morning for a full session, but with many traders still home for the holiday weekend, we should see another calm day. This is especially true because there is nothing of relevance scheduled for release Friday.