Tuesday, January 11, 2011

Market UpDate W/Bond Market Opening in Negative Territory

Tuesday’s bond market has opened in negative territory with no relevant economic data scheduled for release and the stock markets showing early gains. The Dow is currently up 58 points while the Nasdaq has gained 10 points. The bond market is currently down 14/32, which will likely push this morning’s mortgage rates higher by approximately .125 of a discount point. Strength in bonds late yesterday is limiting this morning’s increase in rates.
There is again no relevant economic data scheduled for release today. Tomorrow begins a fairly active three days in terms of economic releases and events that are relevant to mortgage rates. There is nothing of importance happening tomorrow morning, except for the 10-year Treasury Note auction. It is common to see some pressure in bonds ahead of these types of sales as firms that are participating adjust their holdings to prepare for the auction. This may lead to a negative open in the bond market tomorrow since the benchmark security of the bond market is the 10-year Note, but the impact on morning mortgage rates should be fairly minimal.
10-year Notes are being sold tomorrow while 30-year Bonds will go to auction Thursday. Tomorrow’s sale is the more important of the two as it will give us a better 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 hours. 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 result in upward revisions to mortgage rates.

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