Mortgage Update

Source: Ken Mason, Mortgage California

Tuesday’s bond market has opened in negative territory following strong gains in stocks. The stock markets are on the rebound with the Dow up 126 points and the Nasdaq up 23 points. The bond market is currently down 9/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point.

There was no relevant economic data scheduled for release today, so look for the stock markets to be the biggest influence on bond trading and mortgage rates the remainder of the day. If the major stock indexes remain near current levels, expect the bond market and mortgage rates to follow suit. If they give back this morning’s gains, the bond market may improve, possibly improving mortgage rates this afternoon.

The first economic report of the week comes tomorrow morning, but it is the least important of the three scheduled. December’s Goods and Services Trade Balance data will be posted early tomorrow morning. This report measures the U.S. trade deficit and can affect the value of the U.S. dollar versus other currencies, but it usually does not cause enough movement in bond prices to affect mortgage rates. It is expected to show a $35.5 billion trade deficit.

The two important Treasury auctions come tomorrow and Thursday when 10-year Notes and 30-year Bonds are sold. The 10-year sale is the more important one as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would likely result in upward revisions to mortgage rates.