Tuesday’s bond market has opened in positive territory as heavy selling in stocks is making bonds more attractive to investors. The Dow is currently down 577 points while the Nasdaq has lost 293 points. The bond market is currently up 15/32 (0.67%), but noticeable weakness Friday afternoon is going to limit the size of this morning’s improvement in rates. If you saw an intraday increase Friday afternoon, you should see a decent improvement in this morning’s rates. Today’s rates should be slightly lower than Friday’s early pricing. The markets were closed yesterday for the Labor Day holiday.
There is nothing of importance set for release today that is expected to influence mortgage rates. We are seeing bonds react to stock selling this morning. Generally speaking, what is bad news for stocks is favorable for Treasury and mortgage bonds. As stocks go into selling mode, investors often seek safety in bonds. Today is a perfect example of that correlation. If stocks extend their morning losses, we could see bonds improve and mortgage rates revise lower later today.
The rest of the week has only two monthly economic reports that we need to be concerned with in addition to a couple of Treasury auctions. All of the relevant economic data comes during the latter days, so we could see the most movement in rates as the week progresses. That is unless stocks continue their slide the next couple of days.
Tomorrow afternoon will start this week’s activities with the first of two Treasury auctions that have the potential to affect mortgage rates. 10-year Treasury Notes will be sold tomorrow while 30-year Bonds will go Thursday. If these sales are met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is strong, we could see bond prices move higher and rates inch lower during afternoon trading those days. However, weak levels of interest could lead to broader selling in the bond market that could push mortgage rates higher. Results of each sale will be posted at 1:00 PM ET on auction day, making these early afternoon events for rates.
Overall, Friday is likely to be the most active day for rates, but we may see some movement Thursday also with the PPI and weekly unemployment figures set for release. The best candidate for calmest day is tomorrow. Even though we don’t have a lot to watch this week, it still could be an active few days for rates. Therefore, keep an eye on the markets if still floating an interest rate and closing in the near future.