Tuesday’s bond market has opened in negative territory due to overnight losses and unfavorable economic news. Stocks are showing early losses, pushing the Dow down 55 points and the Nasdaq down 166 points. The bond market is currently down 14/32 (2.79%). However, gains late yesterday are going to limit this morning’s increase in mortgage rates to just a slight move. If you saw an intraday improvement in pricing Monday, you will see a much more noticeable increase this morning.
Employee Productivity and Costs data for the second quarter was posted at 8:30 AM ET this morning, revealing a 4.6% decline in worker output and a 10.8% jump in the labor costs reading. Both readings were a little on the bad news side for mortgage rates, but bonds were looking to open in negative ground before this report was released.
Tomorrow brings the release us an extremely influential report that will tell us if inflation at the consumer level of the economy is starting to recede or still rising. July's Consumer Price Index (CPI) will be posted at 8:30 AM ET. It is expected to show a 0.2% increase in the overall readings and a 0.5% rise in the more important core data that excludes volatile food and energy costs. Weaker readings should help lead to lower mortgage rates since it would mean inflationary pressures were softer than thought last month.
Also set for tomorrow is the 10-year Treasury Note auction that has the potential to affect rates during afternoon trading. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If it was met with a decent demand from investors, indicating that interest in longer-term securities such as mortgage-related bonds is good, we could see an intraday downward revision to mortgage pricing after results are posted at 1:00 PM ET.