Wednesday’s bond market has opened flat as traders await this afternoon’s events and digest yesterday’s rally. The major stock indexes are nearly unchanged from yesterday’s closing levels with the Dow and Nasdaq both down a point or two. The bond market is currently flat (2.34%), but due to yesterday’s afternoon strength in bonds we should see this morning’s mortgage rates be approximately .250 of a discount point lower than Tuesday’s morning pricing.
Yesterday’s afternoon bond rally was fueled mostly by stock selling that picked up pace during late trading, caused by fears of a slowing global economy. The Dow eventually closed down 272 points while the Nasdaq lost 69 points. As stocks fell throughout the day, funds shifted into bonds as a safe-haven. If your lender improved rates intra-day yesterday, you will likely see a small improvement in this morning’s pricing. Some lenders may have waited until today to reflect those gains, so how much of an improvement this morning depends on the size of the adjustment late yesterday.
There is no relevant economic data set for release this morning. However, we do have two events taking place this afternoon. The first of this week’s two important Treasury auctions is taking place today. 10-year Treasury Notes are being sold today while 30-year Bonds go tomorrow. If today’s sale is met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted and mortgage rates may move higher. Those results will be announced at 1:00 PM, so any reaction will come during early afternoon trading.
Also this afternoon is the release of the minutes from the most recent FOMC meeting at 2:00 PM ET. These may move the markets or could be a non-factor, depending on what they say. Due to an extremely light week in terms of economic releases, they could be a little more influential than usual. The key points traders are looking for are concerns over growth not only in our economy, but also the global economy. Also of high interest are inflation and unemployment numbers and the Fed’s next monetary policy move. If Fed members were concerned about the economy continuing to grow, we may see the bond market move higher and mortgage rates lower later today. It will be interesting to see how much debate and disagreement amongst members took place during the meeting, particularly about when they will start raising key short-term interest rates. It is worth noting though that the last FOMC meeting was followed by revised economic predications and a press conference with Fed Chair Yellen. Therefore, the likelihood of seeing a significant surprise in the minutes is relatively low.
Besides the 30-year Bond auction, tomorrow also has last week’s unemployment figures at 8:30 AM. This report usually doesn’t cause much movement in the markets or mortgage rates unless it shows a significant jump or decline in initial claims for benefits. But since this week has so little to drive trading, it could draw more attention than it usually does. Forecasts are calling for 295,000 initial claims, up from the previous week’s 287,000. The larger the number of new filings, the better the news it is for the bond market and mortgage shoppers