Tuesday’s bond market has opened well in positive territory following weak economic news from overseas. The stock markets are showing sizable losses with the Dow down 115 points and the Nasdaq down 34 points. The bond market is currently up 25/32 (1.81%), which should improve this morning’s mortgage rates by approximately .125 of a discount point if comparing to Monday’s early pricing. Some weakness in bonds late yesterday are preventing more of an improvement in this morning’s rates.
There is nothing scheduled for release today here in the U.S. that has the potential to affect mortgage rates. We are seeing bonds extend overnight gains and on top of that, weak economic data from China is renewing global economic concerns that make bonds more attractive. If stocks remain near current levels, bonds and mortgage rates should follow suit. If the major stock indexes rebound and recover a good portion of this morning’s early losses, we could see bonds give back some of their gains also.
Tomorrow doesn’t have any relevant economic data set for release, but we do have an afternoon event to watch. Morning trading will likely be driven by stock movement as long as no surprises come from overseas again.
The afternoon event is the 10-year Treasury Note auction. Results will be posted at 1:00 PM ET, so any reaction will come during early afternoon trading. 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 these types of sales often lead to bond selling and an increase in mortgage rates.