Wednesday’s bond market has opened in negative territory again with stocks showing early strength after yesterday’s rally. The Dow is currently up 75 points while the Nasdaq has gained 21 points. The bond market is currently down 17/32 (2.24%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
Today has no relevant economic data scheduled for release, but we do have an afternoon event that has the potential to affect mortgage rates. We should watch stocks closely also for advance warning of a move in bonds. The improvements in stocks mentioned above are well below the best of the morning. If those gains continue to dwindle and the major indexes slip into negative ground, we could see bonds improve later today.
The 10-year Treasury Note auction is taking place today. Results will be posted at 1:00 PM ET. If this auction is met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is strengthening, bond prices should improve when results are released. If the reaction is strong enough, an improvement in mortgage rates will follow soon after. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher this afternoon. This scenario will repeat itself tomorrow also when 30-year Bonds are sold.
Tomorrow’s only other relevant event is the release of last week’s unemployment figures. They are expected to show that 275,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week’s 282,000 initial claims, indicating the employment sector strengthened slightly last week. Since rising claims hints at a weakening employment sector, the larger the number the better the news it is for mortgage rates. Although, it is worth noting that because this is only a weekly snapshot, it usually takes a surprise increase or decline for the report to noticeably affect rates.