Mortgage bond prices opened lower Tuesday

Mortgage bond prices opened lower Tuesday morning adding to the small losses seen Monday afternoon. Rates are under pressure following a move by Fitch to downgrade Japan’s debt. The rating company cited “high and rising public debt ratios as the reason for the cut.

Traders are now waiting for stocks to begin trade at 9:30 am ET and for the release of existing home sales data set for 10:00 am ET. This afternoon the Treasury will auction $35B of 2-year notes. With the recent downdraft in rates, the yield paid to investors will be near all time lows. Traders will be watching this offering closely for overall and foreign interest. Auction results will be published by 1:15 pm ET.

In Europe The Organization for Economic Cooperation and Development (OECD) cut its forecast for growth in the euro zone for this year and next. They warned that unless political leaders take decisive actions the debt crisis could pull Europe into a vicious downward spiral. The organization sees the deep recessions in Spain and Italy removing 1.5% of output. Throw in Portugal with an expected decline of 3.2% and Greece at 5.3% and that all adds up to a lot of unemployed people.

Event Calendar:
Tuesday, May 22, 2012
Existing Home Sales @ 10 am ET

Tuesday, May 22, 2012
2-year Treasury Note Auction @ 1:15 pm ET