Wednesday’s bond market has opened in negative territory. The stock markets are showing gains of 70 points in the Dow and 58 points in the Nasdaq. The bond market is currently down 4/32 (1.74%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
There are two events taking place today that are likely to influence mortgage rates. The first is in progress now. Fed Chair Janet Yellen is speaking before the House Financial Services Committee this morning in day one of her two-day semi-annual congressional update on the economy and monetary policy. In short she states that our economy is expected to continue to grow but the potential hurdles to doing so are stronger. Things like oil prices and stock losses along with global economic conditions, particularly in China, could make it more difficult for our growth to stay on track. None of these points came as much of a surprise. Bonds were negative before her prepared statement was released and remain near those same levels now.
She is currently in the Q&A part of the proceeding with committee members. This will be repeated tomorrow with the Senate Banking Committee, but day two usually does not yield anything noticeably different than the first day.
Later today, we have the results of the 10-year Treasury Note auction to digest. This is the first of two important Treasury auctions that can have an impact on mortgage rates this week. 30-year Bonds will be auctioned tomorrow. Today’s sale is the more important of the two as it will give us an indication for demand of mortgage-related securities. If these sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading sessions. 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 upward afternoon revisions to mortgage rates. Results are posted at 1:00 PM ET each day, so any reaction will come during early afternoon trading.
Last week’s unemployment figures is tomorrow’s only economic news. They will be released at 8:30 AM ET and are expected to show that 280,000 new claims for unemployment benefits were filed last week, up from the previous week’s total of 277,000. Rising initial claims are a sign of employment sector weakness, so the larger the number of claims, the better the news it is for mortgage rates. Although, because this is only a weekly reading we usually need to see a significant variance from forecasts for it to impact mortgage rates.