Today's Mortgage Commentary

Updated on November 4, 2024 10:09:59 AM EST
Monday’s bond market has opened up sharply to erase Friday’s afternoon sell-off. Stocks are showing early losses of 92 points in the Dow and 19 points in the Nasdaq. The bond market is currently up 31/32 (4.27%), which should bring mortgage rates back to Friday’s early pricing. Heavy selling throughout the afternoon led to widespread noticeable upward revisions to mortgage pricing before closing Friday. The actual size of the improvement you will see this morning depends on how much of a revision you saw Friday afternoon.

This week’s busy calendar began late this morning with the release of September's Factory Orders report. It showed a bit of weakness in the manufacturing sector with new orders falling 0.5%, but that came as no surprise. Forecasts had new orders falling 0.4% and since this is just a moderately important release, the variance was not enough to draw much of a reaction in the bond or mortgage markets.

Today’s early bond rally is likely being fueled by a couple of factors, none of which are this morning’s sole economic release. One is the fact that after Friday’s sell-off, the benchmark 10-year Treasury Note yield touched 4.39%. This was high enough to draw investor funds into bonds with an appealing rate of return. The other and most prominent was polling news over the weekend that showed VP Harris doing much better in Iowa than was expected. This led to a reversal of bond selling last week that was fueled by predictions President Trump would win the election. It goes to show that Wednesday is probably going to be an extremely active day for the markets even before we get the FOMC meeting results later in the week.

The remainder of this week has only three more monthly and quarterly economic reports scheduled, in addition to a couple of Treasury auctions and an FOMC meeting that will affect afternoon bond trading three days. We should see plenty of movement in the markets and mortgage pricing this week as a result of those events.

Tomorrow brings us a morning economic release and one of the week’s afternoon events that we will be watching. The Institute for Supply Management (ISM) will release their non-manufacturing index (aka service index) at 10:00 AM ET. It is expected to show a reading of 53.5 for October, down a little from September’s 54.9. A reading above 50.0 means more surveyed executives felt business improved during the month than those who said it worsened, but a decline from the previous month is good news. Bad news for rates would be an unexpected increase.

There is also a 10-year Treasury Note auction taking place tomorrow that will give us an indication of demand for long-term securities, as are mortgage bonds. If the sale is met with strong interest from investors, we should see the bond market move higher during afternoon trading tomorrow. However, a lackluster demand 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 could cause an upward revision to mortgage rates.

Overall, Thursday’s FOMC meeting adjournment makes that day the most important for mortgage rates. However, Wednesday could be pretty active also after tomorrow’s election results are made available, assuming there is a clear winner. No day stands out as a good candidate for calmest. It will likely be a volatile week for the financial markets and mortgage rates with plenty of news headlines. Accordingly, keep an eye on the markets if still floating an interest rate and closing in the near future.


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