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Monday’s bond market has opened in negative territory, extending Friday’s late selling. The stock markets are also shrugging off this weekend’s geopolitical news, starting the week with strong gains. The Dow is currently up 182 points while the Nasdaq is up 46 points. The bond market is currently down 8/32, which should push this morning’s mortgage rates higher by approximately .250 – .375 of a discount point if comparing to Friday’s morning pricing. Most of that increase is a result of weakness late Friday and not this morning’s opening.
Today’s only relevant economic data was February’s Industrial Production at 9:15 AM ET. It showed that output at U.S. factories, mines and utilities rose 0.6%, exceeding forecasts by a pretty wide margin. Analysts were expecting to see an increase of only 0.1%, meaning industrial production was much stronger than thought. That makes the data negative for the bond market and mortgage rates.
The remainder of the week brings us four more monthly reports that have the potential to influence mortgage rates and another FOMC meeting followed by revised economic predictions and a press conference with Chairman Yellen. Apparently the weekend news out of Ukraine was already built in to last week’s trading, so we are seeing little reaction to it. As a result, stock strength has pressured bonds during early trading this morning. The Ukraine/Russia issue may come back into the markets if it escalates further or major headline news crosses the wire. This will make for an interesting couple of days in the mortgage market.
Two of those reports will come early tomorrow morning. The first is February’s Consumer Price Index (CPI) that measures inflationary pressures at the very important consumer level of the economy. Its results are watched closely by bond market traders and analysts because rising inflation makes long-term securities such as mortgage-related bonds less appealing to investors. It is expected to show a 0.2% increase in the overall index and a 0.1% rise in the more important core data that excludes more volatile food and energy prices. If we see weaker than expected readings like we did in last week’s Producer Price Index (PPI), bond prices should rise and mortgage rates will likely fall early tomorrow.
The second is February’s Housing Starts data. This report tracks construction starts of new housing. It doesn’t usually cause much movement in mortgage rates and is considered one of the less important reports we see each month. It is expected to show an increase in housing starts, indicating growth in the housing sector. Good news for the bond market and mortgage rates would be a sizable decline in new starts, but unless we see a large variance from forecasts the data likely will not lead to a noticeable move in mortgage pricing.
Overall, I am considering Wednesday as the key day of the week with the Fed events scheduled, but the Ukraine/Russia conflict and stock movement can make any day important for mortgage rates. The least important day will probably be Friday.