Friday’s bond market has opened well in positive territory with stocks in negative ground and concerns about the financial issues with Greece still in the headlines. The major stock indexes are showing moderate losses of 56 points in the Dow and 9 points in the Nasdaq. The bond market is currently up 19/32 (2.05%), but due to some weakness in trading late yesterday, this morning’s improvement in mortgage rates will likely be limited to approximately .125 of a discount point.
There is nothing of importance scheduled for release today, so stocks and Greece bailout news are taking center stage this morning. European lenders and Greek leaders are meeting today to try to come to an agreement that would extend Greece’s bailout package that is currently due to expire at the end of this month. If no agreement is reached, many think Greece will be unable to pay its bills and will end up filing bankruptcy as a result. That would drive Greece out of the Euro currency and could severely disrupt the regional and possibly global economies.
As progress (or a lack of) is reported throughout the meeting, we can expect the markets to react accordingly. The early momentum has been favorable for bonds and not so much for stocks. If the major stock indexes extend their early losses, we could see more funds flow into bonds, driving prices higher and yields lower later today. Since mortgage rates tend to follow bond yields, this would be good news for mortgage shoppers. However, it is worth noting that the benchmark 10-year Treasury Note yield is getting closer to 2.00%. We may see some resistance at that level without a major event to push past it. Therefore, while there is a potential benefit to floating an interest rate currently, the risk of doing so may be growing as we get closer to that level.
We have a pretty full and active calendar next week that includes some important economic data, a couple of potentially influential Treasury auctions and semi-annual testimony from Fed Chair Yellen to Congress. There are events set for each day of the week, including Monday when January’s Existing Home Sales report will be posted. Look for details on next week’s schedule in Sunday evening’s weekly preview.