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Tuesday’s bond market has opened in positive territory again, extending
yesterday’s afternoon strength. The stock markets are showing minor gains
with the Dow up 42 points and the Nasdaq up 6 points. The bond market is
currently up 4/32, which with yesterday’s late strength should improve
this morning’s mortgage rates by approximately .375 of a discount point
from Monday’s morning pricing.
There is nothing of importance on the calendar for today or tomorrow
morning, but tomorrow afternoon gets much more active. The first of this
week’s two important Treasury auctions will take place tomorrow when
10-year Notes will be sold. That sale will be followed by a 30-year Bond
auction Thursday. These sales can influence market trading in bonds and
possibly affect mortgage rates. If the sales are met with a strong demand
from investors, particularly tomorrow's sale because the 10-year Note is
the benchmark bond market security, we should see afternoon improvements
in bonds that could lead to downward revisions to mortgage rates.
However, if buyers stay on the sidelines, we may see bonds fall after
results are posted at 1:00 PM ET and mortgage rates move higher those
days.
Late last week it was hard to believe we would see strong auction results
in this week’s sales. However, a nice rally in bonds yesterday and
strength this morning may be a sign that there are more believers in the
theory that the recent bond sell-off was an overreaction. In addition,
the 10-year Note is currently yielding 2.62%, which may help draw some
interest as it is .40% higher than where it was at the last auction of
this security and almost .875% higher than May’s auction. It will be
interesting to see if the higher yield will attract more investors,
although rising stock prices do allow quicker profits for long-term
buyers.
Also tomorrow is the afternoon release of the minutes from the last FOMC
meeting. There is a good possibility of the markets reacting to them
following their 2:00 PM ET release. I find it hard to believe that they
could reveal anything more surprising than we got after the last FOMC
meeting or during Chairman Bernanke’s press conference that followed.
Still, market participants will be looking for anything new, particularly
about the estimated timeframe when the Fed will begin tapering their
current $85 billion a month bond buying program (QE3). The minutes will
tell us how members voted for related motions and could cause more
volatility in the markets if there is anything unexpected in them.
Fed Chairman Bernanke has a speaking engagement in Boston after the
markets close tomorrow. The topic is related to the history of the Fed’s
monetary policy and he will be speaking to a group of economists. I don’t
see this speech causing much movement in the markets, but anytime the Fed
Chairman speaks publicly, his words draw attention. If there is a
reaction to his speech, we won’t see it until Thursday’s morning trading.
If I were considering financing/refinancing a home, I would.... Lock if
my closing was taking place within 7 days... Lock if my closing was
taking place between 8 and 20 days... Lock if my closing was taking place
between 21 and 60 days... Float if my closing was taking place over 60
days from now...
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