Tuesday’s bond market has opened slightly in positive territory despite some unfavorable housing news and early stock gains. The major stock indexes are showing minor gains during early trading, especially if comparing to yesterday’s sizable rally. The Dow is currently up 43 points while the Nasdaq has gained 10 points. The bond market is currently up 2/32 (2.38%), but due to selling late yesterday that led to many lenders posting an intraday rate increase, we will likely see little change in this morning’s rates if comparing to Monday’s morning pricing.
July’s Consumer Price Index (CPI) kicked off this week’s calendar at 8:30 AM ET this morning, revealing a 0.1% rise in both the overall and core readings. Those matched forecasts and indicated that inflationary pressures remained subdued at the consumer level of the economy, making the data neutral for bonds and mortgage rates. The minor increase is good news but since they were of no surprise to traders, they have had little impact on today’s trading.
Also posted early this morning was July’s Housing Starts. The Commerce Department said that construction starts of new homes in the U.S. rose a whopping 15.7%, exceeding forecasts by a sizable margin. Even a secondary reading that tracks newly issued building permits that are needed for future starts showed a sizable increase. This is a sign of growth in the new home portion of the housing sector. Therefore, the data should be considered negative for bonds and mortgage pricing.
Tomorrow morning has no relevant economic data set for release, but we will get the minutes from the last FOMC meeting during afternoon hours. There is a pretty good possibility of the markets reacting to them following their release. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy, economic growth and how recent geopolitical events may impact the domestic and global economies. The goal is to form opinions about when Fed Chair Yellen and friends are likely to start raising key short-term interest rates. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading. This is one of those events that can cause significant movement in rates after its release or be a non-factor, so be prepared for a move, but not surprised if the impact on rates is minimal.