Wednesday’s bond market has opened up sharply, starting another cycle in the thrilling rollercoaster ride of the past couple weeks. Yes, stocks are giving back nearly all of yesterday’s late rally that had pushed the Dow higher by 429 points. The Dow is currently down 398 points while the Nasdaq has lost 84 points. The bond market is now up 31/32, which will likely improve this morning’s mortgage rates by approximately .375 - .500 of a discount point over yesterday’s morning pricing.
There is no relevant economic data scheduled for release today, but we do have a fairly important Treasury auction with 10-year Notes being sold. It appears that the sale is of little concern to active traders as we see more funds shifted into the bond market as a safe-haven. If today’s sale is met with a strong demand from investors, we could see strength in the broader bond market after results are posted at 1:00 ET. If investor interest was weak, bonds will likely move lower during afternoon trading, possibly causing upward revisions to mortgage rates.
If the recent pattern extends to today, we may see a sizable move in stocks and bonds during afternoon trading, leading to an intra-day update to our report. But just in case it turns out to be a relatively calm afternoon (comparatively speaking of course), we will tackle tomorrow’s events in this morning’s report.
Tomorrow has two minor economic reports scheduled for release. The first is June's Trade Balance report at 8:30 AM ET tomorrow morning. It gives us the size of the U.S. trade deficit but is the week's least important report and likely will have little impact on the bond market and mortgage rates. Analysts are expecting to see a $48.0 billion deficit, but it will take a wide variance to directly influence mortgage pricing.
The second report of the day is last week’s unemployment figures from the Labor Department. They are expected to announce that 409,000 new claims for unemployment benefits were filed last week, up from the previous week. A larger than forecasted increase would be good news for the bond market and mortgage rates as it would point towards weakness in the labor market. However, since this data tracks only a single week’s worth of new claims, it often does not cause a noticeable movement in mortgage rates unless it shows a large increase or decline in new claims.
We also have the 30-year Bond auction to watch tomorrow, but it appears that stock weakness or strength will be the biggest influence on bond trading and mortgage rates in the immediate future..
