Mel's Blog

July 09 Market News #5

July 8th, 2009 2:36 PM by Mel Samick

Wednesday's bond market has opened flat again as investors prepare for the events of the next couple of days. The stock markets are showing minor gains after yesterday's afternoon sell-off. The Dow is currently up 28 points while the Nasdaq is nearly unchanged. The bond market is currently up 3/32, which will likely keep this morning's mortgage rates near yesterday's morning rates.

There is no relevant economic data scheduled for release yet again today. But we do have two issues that are quite relevant to bond trading and mortgage rates. The first is today's 10-year Treasury Note auction. Results of the sale will be posted at 1:00 PM ET. If the sale was met with a strong demand from investors, particularly international buyers, we could see bonds rally during afternoon trading. The flip side is that a weak demand would indicate a waning interest in U.S. securities, making current bonds less appealing to investors. That likely would drive bond prices lower and mortgage rates higher this afternoon.

The second event is the release of quarterly earnings from Dow component Alcoa after the stock markets close today. They traditionally are the first major company to release earnings each quarter. If their results and forecasts fall short of expectations, we can expect to see stocks fall during after-hours trading and early tomorrow morning. The stock weakness could drive bonds higher as traders seek safe-haven in bonds. But if they beat forecasts, we will probably see stocks move higher, drawing funds from bonds and leading to higher mortgage rates in the morning.

The only semi-relevant economic data scheduled for release tomorrow morning are weekly unemployment figures from the Labor Department. They are expected to say that 600,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week's total. However, this data usually has a limited impact on bond trading and mortgage rates since it gives us only a week's worth of new claims. With no other relevant economic data on the calendar tomorrow and little news already posted this week, we may see a slightly stronger than usual reaction to the results. But I don't see this data being a market mover tomorrow or significantly affecting mortgage rates.

Also tomorrow is the Treasury's sale of 30-year Bonds. This sale is less likely to affect mortgage rates than today's 10-year Note sale does, but that doesn't mean we can ignore its results. The same principals apply as today's strong demand is favorable for bonds while a lackluster interest could lead to bond weakness and potential increases to mortgage rates.

Friday morning gives us some factual monthly economic data for the markets to digest. Neither of the two reports are considered to be of high importance to the financial markets or mortgage rates, but do carry enough weight to cause some movement if their results vary greatly from forecasts. We will touch more on those in tomorrow's commentary.

                                Mel

Posted in:General
Posted by Mel Samick on July 8th, 2009 2:36 PM

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