Wednesday, February 10, 2010

Market UpDate

Wednesday's bond market has opened relatively flat as investors prepare for today's important 10-year Note auction. The stock markets are showing losses with the Dow down 72 points and the Nasdaq down 15 points. The bond market is currently up 2/32, but we will likely still see this morning's mortgage rates move higher by approximately .125 - .250 of a discount point due to weakness late yesterday.
Today's only semi-relevant economic data was December's Goods and Services Trade Balance. It revealed a $40.2 billion trade deficit that was much larger than expected. This data does not usually heavily influence mortgage rates, but can hurt or boost the U.S. dollar against other currencies that can make our securities more or less attractive to international investors. But today's data has not affected this morning's mortgage rates.
I suspect that today's 10-year Treasury Note auction will cause some afternoon revisions to mortgage rates today. I w ould be surprised if there was an overwhelmingly strong demand for the Notes, and as a result we could see afternoon weakness in bonds. This morning's flat open is not much concern as it is normal to see weakness ahead of the sales as participants prepare for them. But that any losses are usually recovered after if the sale goes well. Results will be posted at 1:00 PM ET, so any reaction would be during afternoon hours.
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