Tuesday’s bond market has opened in negative territory despite a soft opening in stocks and no relevant economic news. The major stock indexes are showing early losses with the Dow down 32 points and the Nasdaq down 40 points. The bond market is currently down 15/32 (2.43%), which should push this morning’s mortgage rates higher by approximately .250 of a discount point.
There again is nothing of importance scheduled for release today. Today’s selling is more a result of the recent overall negative tone in bonds than anything else. With the benchmark 10-year Treasury Note yield at 2.43%, there isn’t much to prevent it from breaking above 2.50% in the immediate future. Therefore, please be careful if still floating an interest rate and closing in the near future.
Tomorrow has no economic reports that we need to watch, but the first of this week’s two relevant Treasury auctions will take place tomorrow. We have 10-year Notes tomorrow and 30-year Bonds Thursday. Results of both auctions will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading, however, weak demand for the securities could lead to selling and an increase to mortgage rates. It is common to see some pressure in bonds right before these sales as investors prepare for them, but as long as the sales are not weak those pre-auction losses are usually recovered once they are completed. It is worth noting though that this morning’s selling is not related to tomorrow’s auction.
We do have some important economic data coming later in the week with the release of May’s Retail Sales and Producer Price Index (PPI). Those are important enough reports to cause noticeable movement in mortgage rates, but any improvement would be from recent highs and not setting new lows.