Tuesday’s bond market has opened in positive territory due mostly to early stock weakness. The major stock indexes are showing sizable losses with the Dow down 190 points and the Nasdaq down 66 points. The bond market is currently up 13/32 (2.15%), but we likely will see little change in this morning’s mortgage rates if comparing to Monday’s morning pricing because of weakness in bonds late yesterday.
There is nothing of importance being released today, leaving bonds to be driven by stock trading. The morning selling in stocks has helped drive funds into bonds. This is common in times of volatility as investors seek safe-haven from the large swings in stocks. Today it is beneficial for mortgage shoppers, but if the major stock indexes rebound tomorrow, we should see today’s bond gains erased fairly quickly.
Tomorrow doesn’t have any relevant data scheduled either, but it does bring us the first of this week’s two Treasury auctions that have the potential to influence mortgage rates. The Treasury will sell 5-year Notes tomorrow and 7-year Notes Thursday. They will tell us if there is an appetite in the markets for medium-term securities. If investor demand in these sales is strong, particularly from international buyers, the broader bond market should move higher, pushing mortgage rates lower. But a lackluster interest from investors could lead to bond selling and higher mortgage pricing. The results of the sales will be announced at 1:00 PM ET each day, so any reaction to the results will come during afternoon trading tomorrow and Thursday.
We do have a small handful of relevant reports set for release Thursday and Friday, so the most active days of the week still are likely ahead of us.