Tuesday’s bond market has opened down slightly with stocks showing early strength. The major stock indexes are showing moderate gains with the Dow up 56 points and the Nasdaq up 19 points. The bond market is currently down 3/32 (1.98%), which with yesterday’s afternoon weakness should push this morning’s mortgage rates higher by approximately .125 of a discount point over Monday’s morning pricing.
There is nothing set for release today that is of relevance to mortgage rates. If stocks remain near current levels, bond prices and mortgage rates should follow suit. However, if stocks extend their early gains, we could see bonds suffer and mortgage rates move slightly higher. On the other hand, a move that erases this morning’s gains in stocks should help contribute to a downward revision to mortgage pricing later today.
Tomorrow morning also has little to drive bond trading and mortgage rates. With the benchmark 10-year Treasury Note yield testing 2.00%, we are at a key threshold for mortgage rates. I suspect that we may see yields move a little lower from this point, brining mortgage rates down also. At least in the immediate future. Longer term though is a bit more complex, so please proceed cautiously if still floating an interest rate and closing in the near future.
Even though tomorrow does not have any important economic data we do have a potentially highly influential Treasury auction that can affect mortgage rates. Tomorrow’s 10-year Note sale is the more important of this week’s two as it will give us an indication for demand of mortgage-related securities. If the sale was met with a strong demand from investors, we should see the bond market move higher during afternoon trading. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in an upward afternoon revision to mortgage rates.