Wednesday’s bond market has opened in negative territory again as investors get antsy about today’s Fed event. The stock markets apparently are not as concerned about it with the Dow up 88 points and the Nasdaq up 11 points. The bond market is currently down 11/32 (2.29%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
Today’s only relevant events take place this afternoon and they are not economic reports. The first is the 5-year Treasury Note auction. This sale will not directly impact mortgage pricing, but can influence general bond market sentiment. If sales such as this go poorly, we sometimes see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into the bond market. The buying of bonds that follows translates into lower mortgage rates. Results will be posted at 1:00 PM ET, so look for any reaction to come during early afternoon hours.
Next up is the adjournment of the fifth FOMC meeting of the year that actually began yesterday. This is not a meeting that will be followed by a press conference with Fed Chair Yellen nor is it expected to yield a change to key interest rates. Many analysts believe the Fed will make their first increase to key short-term interest rates at the September FOMC meeting. Anything in the post-meeting statement that either confirms or contradicts that theory will cause volatility in the markets. The meeting will adjourn at 2:00 PM ET, so any reaction will come during mid-afternoon hours.
I am expecting some volatility this afternoon, so we will be updating this report shortly after the markets have had an opportunity to react to the FOMC statement. There is highly important data set for release tomorrow morning (GDP) but it will be addressed in this afternoon’s revision.