Today's Commentary

Updated on April 7, 2020 10:17:06 AM EDT
Tuesday’s bond market has opened in negative territory, due partly to another strong opening in stocks. The Dow is currently up 527 points while the Nasdaq has gained 98 points. The bond market is currently down 25/32 (0.75%), but strength in mortgage bonds late in the day yesterday should offset this morning’s losses, leaving rates slightly better than Monday’s early pricing.

There again is nothing scheduled for release today that is expected to affect rates. We are seeing Treasury bonds move with stocks, but fortunately, the reaction in mortgage bonds is not nearly as strong. Look for them to remain independent of Treasury securities, at least for the near future. That will limit the negative impact a stock rally may have on mortgage rates.

Activities start tomorrow afternoon with the first of two Treasury auctions that have traditionally affected mortgage rates. There is a 10-year Treasury Note sale tomorrow and a 30-year Bond sale Thursday. We could see some weakness in bonds ahead of the sales as participating firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand from investors. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading. If the sales were met with a poor demand, afternoon weakness may cause enough of a move to create upward revisions in mortgage pricing tomorrow and/or Thursday.

Tomorrow afternoon also has the minutes from the March 15th FOMC meeting, which was an unscheduled emergency meeting. Market participants will be looking at them closely as they give us insight to the Fed's current thought process and individual Fed member opinions about how bad the economy will get during this pandemic. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets and possible changes in mortgage pricing tomorrow afternoon.


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