Monday’s bond market has opened flat despite early stock weakness. The stock markets are starting the week off in negative territory due to concerns about overseas financial issues. The Dow is currently down 120 points while the Nasdaq has lost 14 points. The bond market is nearly unchanged from Friday’s close, but we will still likely see a slight increase in this morning’s mortgage rates if compared to Friday’s morning pricing.
There is no relevant economic data being released today, so look for movement in stocks to be the biggest force behind a swing in bonds and revisions to mortgage rates. The rest of the week brings us the release of five relevant economic reports that may influence mortgage rates in addition to two Treasury auctions. A couple of these reports are considered to be highly important to the financial and mortgage markets, meaning that we may see significant changes to rates this week. There is a very good chance of seeing noticeable changes in rates at least one day, if not several days.
The week’s first event is a 10-year Treasury Note auction tomorrow, which will be followed by a 30-year Bond auction Wednesday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If the sales are met with a decent demand from investors, indicating interest in longer-term securities such as mortgage-related bonds still exists, the earlier losses are usually recovered after the results are announced. The results of the sales will be posted at 1:00 PM ET each day. If demand was strong, particularly from international investors, we should see mortgage rates improve during afternoon trading tomorrow and Wednesday.
The important economic data starts Wednesday morning when August’s Retail Sales report and Producer Price Index (PPI) will both be posted early morning. The sales report will give us a very important measurement of consumer spending, while the PPI measure inflationary pressures at the producer level of the economy. Each of these reports have the potential to be a market mover, so the fact that both are scheduled for the same day means we have a good possibility of seeing plenty of volatility in the markets and mortgage rates Wednesday.
Overall, I think we need to label Wednesday or Thursday as the most important day of the week with the Retail Sales and CPI reports being released respectively. However, tomorrow’s 10-year Treasury Note auction also has the potential to heavily influence bond trading and mortgage rates.