Tuesday's bond market has opened up sharply following significant stock weakness and a surprise move by the Fed. The stock markets are following the lead of overseas markets yesterday that showed sizable losses as concerns about the U.S. economy grows. The bond market is currently up 23/32, which should improve this morning's mortgage rates by approximately . 250 - .375 of a discount point over Friday's morning rates.

What was expected to be a pretty quiet week has opened quite volatile. The markets were closed yesterday in observance of the Martin Luther King holiday, but international markets were open. The U.S. stock markets were expected to open weak this morning due to the losses overseas. The Federal Reserve jumped in and announced a .75 of a point cut to key short-term interest rates, obviously in an effort to minimize this morning's selling. Whether it helped or not is yet to be determined, but the bond market has benefited as investors look for safety from the volatility. The result is bond strength and stock weakness this morning.

It will be very interesting to see if this is a one or two day spot of weakness in stocks or if this is the beginning of a downward trend. The latter is better for bonds and mortgage rates because we will likely see more flight-to-quality as investors move funds into bond s. This would drive bonds higher and mortgage rates lower. However, if the markets are able to stabilize tomorrow or Wednesday, we could see those funds move back out of bonds, leading to mortgage rates increases. The next day or so will tell us a lot.

This holiday-shortened week brings us the release of only one monthly economic report for the markets to digest. The only monthly report is Thursday's release of December's Existing Home Sales data. The National Association of Realtors will release this information. It gives us a measurement of housing sector strength by tracking home resales during the month. It usually is not considered to be of much importance, but since it is the week's only monthly release it may influence bond trading more than usual.

Also Thursdays is the Labor Department's weekly update on unemployment filings. They are expected to show that after last week's surprise drop, new claims rose back to 325,000 last week. A smaller numb er is considered negative for bonds while a larger than expected rise is positive. But, this data is also not considered to be of high importance. Since it is one of the only two reports released at all, it may influence trading some but not enough to affect mortgage rates.

However, if today's volatility continues, neither of this week's economic releases will have an impact on trading or mortgage rates. This would be a very good time to maintain constant contact with your mortgage professional.