Mortgage investors are standing around with their hands in their pockets this morning while they await the result of the Treasury Department's $21 billion 10-year note auction.
Today's 10-year note sale is the second of three auctions on tap this week. Some market participants are concerned demand may not be strong enough to avoid the necessity of Uncle Sam "sweetening the pot" by accepting lower prices for these securities to attract the required capital. Those concerns are probably misplaced - at least this time around.
The potential for a return of the sovereign European debt crisis to front page news is likely sufficient to drive significant amounts of international investors into the relative safe-haven of today's 10-year note offering. If so, this event will likely have little direct influence on the trend trajectory of mortgage interest rates. Should today's auction be more aggressively bid that most observers now anticipate - the chance for a little "relief" rally this afternoon in the mortgage market will improve dramatically. I am not necessarily expecting any developing rally in the mortgage market today to recover all of the slump we've experienced so far this morning (Fannie Mae 4.0% 30-year down 9/32nds as I write) but it might come close to cutting the price loss so far today in half. The 10-year note auction will conclude at 1:00 p.m. ET and I'll post the results on my website as soon as possible once the final gavel falls.
As they do every Wednesday, the Mortgage Bankers of America have release their mortgage loan application index for the week ended September 3rd. According to the MBA the overall number of mortgage applications drooped 1.5% -- with refinance requests slumping 3.1% while the purchase loan demand improved by 6.3%, marking the largest gain for this component of the overall index in more than three months. Refinance requests once again accounted for four out of every five loan applications for the week.
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