Tuesday’s bond market has opened in negative territory due partly to a strong opening in stocks. The major stock indexes are showing sizable gains during early trading, pushing the Dow higher by 253 points and the Nasdaq up by 78 points. The bond market is currently down 13/32 (2.17%), which should equate to an increase of approximately .125 of a discount point in this morning’s mortgage rates.
There is nothing of importance scheduled for release today. The rest of the week has only two pieces of monthly economic data scheduled for release in addition to two Treasury auctions that have the potential to affect mortgage rates. This is helping bonds react heavily to the stock rebound this morning, pressuring mortgage rates. If the major indexes extend their early gains, we could see bonds fall further and mortgage rates revise higher during afternoon trading. On the other hand, if they give back a good portion of this morning’s improvement, a downward revision to rates may follow.
The first events of the week are two Treasury auctions that have the potential to influence mortgage rates. The first is tomorrow’s 10-year Treasury Note auction, which will be followed by a 30-year Bond auction Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is strengthening, the earlier losses are usually recovered after the results are announced. The results of each sale will be posted at 1:00 PM ET of auction day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading tomorrow and Thursday. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.
Overall, Friday is the best candidate to be most important day with both of this week’s economic reports scheduled, but we could see movement in rates tomorrow afternoon also following the 10-year Note auction. With the FOMC meeting, Fed projections and press conference looming next week, any surprises this week could affect theories about what the Fed will say following that meeting. Therefore, if still floating an interest rate and closing in the near future, I recommend maintaining contact with your mortgage professional this week.