Wednesday’s bond market has opened in negative territory again as this upward trend in yields and mortgage rates continues. The stock markets are fairly calm with the Dow down 8 points and the Nasdaq up 1 point. The bond market is currently down 8/32 (2.53%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
This morning has nothing of importance scheduled for release. However, the first of this week’s two relevant Treasury auctions takes place today. 10-year Notes are being sold today and 30-year Bonds will be auctioned tomorrow. If these sales draw a strong demand from investors, we may see afternoon strength in the broader bond market and possibly an improvement in mortgage rates. On the other hand, a weak level of interest could cause the bond market to extend this morning’s losses, leading to an upward revision in rates later today.
Part of this morning’s weakness in bonds could be attributed to today’s 10-year Note auction. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales go well, indicating that interest in longer-term securities such as mortgage-related bonds is strengthening, the early losses are usually recovered after the results are announced. The results will be posted at 1:00 PM ET, so any reaction will likely come during early afternoon trading.
The other data being posted tomorrow is last week’s unemployment numbers. They are expected to show that 300,000 new claims for unemployment benefits were filed last week, down slightly from the previous week’s 302,000 initial claims. Rising initial claims indicates employment sector weakness, so the higher the number the better the news it is for bonds and mortgage rates. Although it is worth noting that because this is only a weekly snapshot, it usually does not cause much movement in mortgage pricing unless it shows a significant variance from forecasts.