This week brings us the release of no relevant monthly or quarterly economic reports for the markets to digest. There are two Treasury auctions scheduled this week that are likely to have an impact on mortgage rates. With so little on the agenda, we may see a fairly calm week for the mortgage market, particularly the early days.
There are two Treasury auctions this week that could potentially affect mortgage rates. The first is the 10-year Treasury Note auction Wednesday and the 30-year bond sale will be held Thursday. Results of both sales will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates late Wednesday and/or Thursday.
With so little scheduled, we can expect stocks to heavily contribute to bond movement. If stocks post noticeable gains, bonds are likely to move lower. Since bond prices and yields move in opposite directions, this could lead to higher mortgage rates. The benchmark 10-year Treasury Note yield is currently at 1.88%. That is well above the multi-year low of 1.64% that we saw last month but still below a very important threshold of 2.00%. There is a possibility of seeing the yield improve a little in the near term, but I fear we are headed back above 2.00% before too long. If that level is broken, yields and mortgage rates are likely to continue to rise. Therefore, I am maintaining my conservative stance towards locking an interest rate if closing soon. At least for the time being.
Overall, I would label Wednesday as the most important day of the week due to the 10-year Note auction. However, significant movement in stocks could drive bond and mortgage rate direction any day.