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Market Commentary

Updated on Sep 8 2010 11:10AM EST
OpenClose Mortgage Software

Wednesday’s bond market has opened in negative territory again following early gains in stocks. The stock markets are reacting favorable to a bit of good news about overseas debt issues, pushing the Dow up 66 points and the Nasdaq up 18 points. The bond market is currently down 12/32, but we will likely see little change in this morning’s mortgage rates due to strength late yesterday.

The only relevant economic data scheduled for release today comes during afternoon hours, so its impact on mortgage rates won’t be felt until later today. Some of this morning’s weakness in bonds can be attributed to the normal positioning from traders that are participating in today’s 10-year Treasury Note auction. This is common and is not of concern to the mortgage market. If today’s sale goes well, the early morning selling should be erased after the results are posted at 1:00 PM ET.

The Federal Reserve will release its Beige Book report at 2:00 PM ET today. This report details current economic conditions in the U.S. by Federal Reserve region. It is a key source of data when the Fed meets for their FOMC meetings to determine monetary policy. If it reveals any significant surprises, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed’s next move. Most likely though, it will be a non-event and will not lead to a noticeable change in mortgage rates.

July’s Goods and Services Trade Balance data will be posted early tomorrow morning along with weekly unemployment figures from the Labor Department. The Trade Balance report gives us the size of the U.S. trade deficit. It is expected to show a deficit of approximately $47.3 billion, which would be a decline from June’s $49.9 billion. However, I would consider this the least important of this week’s events, meaning it will likely have little impact on bond trading or mortgage rates unless it varies greatly from forecasts.

The Labor Department is expected to say that 470,000 new claims for unemployment benefits were filed last week. This would be a slight decline from the previous week’s number of claims. The higher the number, the better the news for the bond market and mortgage rates because it would indicate weakness in the labor market. But, since this data tracks only a week’s worth of new claims, it usually takes a wide variance from forecasts to have a direct impact on mortgage pricing.