Friday’s bond market has opened up slightly with stocks mixed during early trading. The major stock indexes appear to be closing this volatile week on the move again with the Dow up 33 points and the Nasdaq down 50 points. The bond market is currently up 6/32 (2.30%), but due to weakness late yesterday we should see an increase of approximately .125 – .250 of a discount point in this morning’s mortgage rates.
Yesterday afternoon did bring us another round of volatility in the financial and mortgage markets. This time the impact on mortgage rates was a little more subdued and the string of afternoon rallies came to an end. The 30-year Bond auction was a contributing factor for bonds weakening late in the day. The auction did go a little better than Wednesday’s 10-year Note sale, however, it still was not very strong. Most of the indicators we use to gauge investor interest pointed to average or weaker demand, not the strong demand we were hoping for.
This week’s rally in bonds has brought the benchmark 10-year Treasury Note yield from 2.43% to 2.30%. That is a sizable move for only 5 trading sessions. Unfortunately, while there has been a nice improvement in mortgage rates over that time, it would be prudent to reevaluate your position if still floating an interest rate. Those quick and sizable flight-to-safety moves are usually unwound fairly quickly if stocks stabilize (or the geopolitical crisis gets resolved). The key will be which direction stocks move from here. Further losses in the major indexes could help push bond yields and mortgage rates a little lower. However, even if they remain near current levels, signifying that the sell-off has ended, we could see bond yields bounce higher in the immediate future. That would push mortgage rates up from their current lows. It is my opinion that there is much more of a likelihood of rates moving noticeably higher than there is of them making another downward slide. Accordingly, please proceed cautiously of still floating an interest rate.
Next week is a holiday-shortened week for the bond market due to the Columbus Day holiday Monday. The stock markets will be open for trading Monday but the bond market will not. There is not a lot of data set for release next week, although what is scheduled is pretty important. Look for details on next week’s events in Sunday evening’s weekly preview.