Tuesday’s bond market has opened in positive territory following strong selling in stocks. The major stock indexes are showing sizable losses during early trading with the Dow down 245 points and the Nasdaq down 75 points. The bond market is currently up 18/32 (2.12%), which should improve this morning’s mortgage rates be approximately .250 of a discount point.
This morning’s stock selling is mostly a result of renewed concerns about the Greece financial situation and its bailout program. Officials from Greece are set to meet with European banking leaders tomorrow in an attempt to resolve the differences between Greece’s new ruling party and the creditors that participated in the initial bailout. At risk is funding that will keep Greece out of bankruptcy and in the Eurozone group. While Greece isn’t directly a concern to the U.S., many feel that failing to work out an agreement will cause problems in the region that will eventually impact the U.S. economy. If an agreement is reached this week, then there is a decent chance of seeing stocks rebound and this morning’s bond gains reverse course.
Tomorrow morning has nothing scheduled that is of relevance to mortgage rates. We can expect to see more of today’s action, where news from overseas and stock movement are the biggest factors in tomorrow’s bond trading and mortgage rates. Look for quotes and tidbits of information to come across the wires, causing reactions in our markets. Generally speaking, a resolution on Greece will probably fuel stock buying and bond selling. On the other hand, if there are no closer to coming to an agreement, we could see further gains in bonds and another improvement to mortgage pricing.
The first thing on this week’s U.S. calendar will come tomorrow afternoon. There are two Treasury auctions this week that could potentially affect mortgage rates. The first is the 10-year Treasury Note auction tomorrow and the 30-year bond sale will be held Thursday. Results of both sales 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 as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates late tomorrow and/or Thursday.