Mortgage Market Update
This holiday-shortened week doesn’t have any monthly or quarterly economic reports for the markets to be concerned with. The only scheduled events that we do need to watch are a couple of Treasury auctions early in the week and the weekly unemployment update Thursday morning.
News that President Trump did indeed sign the government funding and coronavirus aid bill tonight may come into play tomorrow. The fact that the presented bill was signed without the higher payments that he demanded a few days ago should be, by theory, favorable news for bonds and mortgage rates. A higher amount in the package would mean more support for the economy and more debt issued to fund it. However, overnight trading in the bond market shows a negative reaction at the moment. If those losses carry into tomorrow morning’s opening, we could see rates start the week a bit higher than Thursday’s early pricing. The markets were closed Friday for the Christmas Day holiday.
There are two relatively important Treasury auctions that may influence bond trading enough to affect mortgage rates slightly. First will be an auction of 5-year Treasury Notes tomorrow followed by 7-year Notes Tuesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. On the other hand, strong investor demand usually makes bonds more attractive to investors and brings funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each day. If there is a reaction to the sales, it will be minor and come shortly after those results are posted.
The bond market will close early Thursday ahead of the New Year’s Day holiday, but stocks will trade a full day. All markets will be closed Friday for the holiday and will reopen for regular trading next Monday.
There is nothing scheduled this week that makes it possible to label one particular day more or less important for mortgage rates. With exception to year-end trading, we should see a relatively calm week in the bond market and mortgage rates. Still, it would be prudent to keep an eye on them if still floating an interest rate and closing in the near future as they can get active without warning.