Monday’s bond market has opened in negative territory due to stronger than expected economic news. The major stock indexes appeared to be in for a morning of strong gains by pre-market trading strength, but that has quickly fizzled out. The Dow is currently up 16 points while the Nasdaq has gained 2 points. The bond market is currently down 7/32 (2.10%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point.
This morning’s economic data was November’s Industrial Production report at 9:15 AM ET. It revealed a 1.3% increase in output at U.S. factories, mines and utilities that was the largest monthly rise in production since May 2010. Since analysts were expecting to see only a 0.7% increase, we should consider the data bad news for bonds and mortgage rates. Fortunately though, this is only a moderately important report and most of this morning’s bond selling is a result of stock gains.
The rest of the week has only three monthly economic reports scheduled for release in addition to some key Fed events that could potentially affect mortgage rates. The second report is November’s Housing Starts at 8:30 AM ET tomorrow morning. This data isn’t known to be highly influential on bonds or mortgage pricing, but it does give us an indication of housing sector strength by tracking new home groundbreakings, so it is worth watching. Analysts are expecting to see an increase in new starts, indicating strength in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates tomorrow.
Overall, Wednesday is the key day of the week due to the release of the Consumer Price Index and the afternoon Fed schedule (FOMC statement, economic forecasts and press conference). The rest of the week’s data and events are considered to be only moderately important, so unless stocks make a major move higher or lower as we are seeing today, we should see only minor changes to rates each day. I believe Friday is the best candidate for calmest day. Despite the lack of a lot of highly important data, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future as the markets can get crazy at any time.