Wednesday’s bond market has opened in positive territory following a very weak open in stocks. The major stock indexes are showing sizable losses during early trading with the Dow down 168 points and the Nasdaq down 53 points. The bond market is currently up 4/32 (2.24%), but due to strong selling in bonds late yesterday we should still see an increase of approximately .250 of a discount point in this morning’s rates if comparing to Tuesday’s morning pricing.
Stocks are still reacting to the Greece situation and now also concerns about China’s financial markets that have been under pressure recently. Generally speaking, stock weakness is good news for mortgage rates as it makes longer-term bonds more attractive to investors. However, the bond market is much more focused on the Greece situation at the moment. If there is even a hint of a potential resolution, I am expecting bond yields to quickly spike higher. Since mortgage rates tend to track bond yields, this would be bad news for mortgage shoppers. Therefore, please maintain contact with your mortgage professional if still floating an interest rate.
There is no relevant economic date set for release today, but we do have two afternoon events that may influence mortgage rates. The first is the 10-year Treasury Note auction, following by tomorrow’s 30-year Bond sale. 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 today’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. If there is a reaction to today’s auction, it will come during early afternoon trading.
The minutes from the last FOMC meeting will be posted at 2:00 PM ET today. There is a possibility of the markets reacting to them if they show something surprising, particularly comments or voting on issues related to the Fed’s first rate hike that is expected later this year. These minutes will tell us how members voted for related motions and could cause more volatility in the markets if there is anything that helps alter analysts’ predictions.