Tuesday’s bond market has opened in negative territory, extending yesterday’s late selling. The stock markets are also showing weakness with the Dow down 83 points and the Nasdaq down 18 points. The bond market is currently down 5/32 (2.48%), which with yesterday’s afternoon losses should push this morning’s mortgage rates higher by approximately .125 – .250 of a discount point.
Many lenders revised pricing higher during afternoon trading yesterday to reflect the downward move in bond prices (upward move in yields). If your lender did post an intraday upward revision to rates yesterday, this morning’s increase should be closer to the .125 level than the .250 of a discount point. That selling allowed the benchmark 10-year Treasury Note yield to close above 2.44% after slipping below during morning trading. Unfortunately, that further supports my theory that 2.44% may now be a floor of resistance, meaning we are likely to see yields and mortgage rates move higher than lower in the immediate future.
There is nothing of importance scheduled for today or tomorrow morning that is expected to have an impact on mortgage rates. There aren’t many reports set for release this week, but we do have some important data scheduled to be posted Friday that can have a noticeable influence on the financial and mortgage markets.
Before that data though, there are two Treasury auctions that have the potential to affect mortgage rates. The first is tomorrow’s 10-year 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/or Thursday. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher.