Tuesday’s bond market has opened in positive territory again as concerns about Greece and other foreign economies continue to fuel bond buying here. The stock markets are showing relatively minor losses with the Dow down 41 points and the Nasdaq down 24 points. The bond market is currently up 25/32 (2.20%), which should improve this morning’s mortgage rates by approximately .250 of a discount point if comparing to Monday’s early pricing.
There is no relevant economic data being released today, so expect the markets to be driven by news or updates regarding Greece’s bailout impasse. Corporate earnings season officially begins late this afternoon when Alcoa posts their 2nd quarter earnings report. This company isn’t necessarily important to gauging economic strength, but it is the first Dow component company that posts earnings each quarter. Since it is the first look into Dow-related earnings, it draws plenty of attention in the markets. Generally speaking, weaker corporate earnings translates into stock selling that makes bonds more attractive to investors. As bond prices rise, yields fall and mortgage rates usually follow bond yields.
Tomorrow morning also has nothing scheduled that is expected to affect mortgage rates. However, the afternoon has two events that we will be watching. The first 10-year Treasury Note auction. This sale will be followed by a 30-year Bond auction Thursday. These sales can influence market trading in bonds and possibly affect mortgage rates. If the sales are met with a strong demand from investors, particularly tomorrow’s sale, we should see afternoon improvements in bonds that could lead to downward revisions to mortgage rates. But if buyers stay on the sidelines, we may see bonds fall after results are posted at 1:00 PM ET and mortgage rates move higher those days.
Also tomorrow afternoon is the release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release. I don’t believe that they will reveal anything surprising from the last FOMC meeting and during Chairperson Yellen’s press conference that followed. Still, market participants will be looking for any indication of when the Fed will make their first rate increase that is expected sometime this year. The minutes will tell us how members voted for related motions and could cause more volatility in the markets if there is anything unexpected in them.