Thursday’s bond market has opened in positive territory, due mostly to strength in overseas bond markets. The stock markets are showing fairly modest losses to help the cause with the Dow down 9 points and the Nasdaq down 27 points. The bond market is currently up 12/32 (1.77%), which should improve this morning’s mortgage rates by approximately .125 of a discount point.
Yesterday’s afternoon release of the FOMC minutes did not show any significant surprises. They did indicate that the Fed is more cautious or concerned about global financial and economic pressures and their impact on our economy. That could help delay the Fed’s next rate hike if there is not a noticeable improvement by their next meeting in mid-March. The news had little impact on yesterday afternoon’s mortgage pricing.
Last week’s unemployment figures were posted at 8:30 AM this morning, revealing 262,000 new claims for benefits. This was a decline from the previous week’s 269,000 initial filings and was lower than the 274,000 that was expected. That makes the data negative for mortgage rates because it hints at a strengthening employment sector. However, because this is only a weekly update, the news did not negatively impact this morning’s pricing.
Also posted this morning was January’s Leading Economic Indicators (LEI) that showed a 0.2% decline. That reading means the indicators are predicting slightly softer economic growth over the next several months. While that technically is good news for bonds, it matched forecasts and did not influence this morning’s rates.
Tomorrow has only one report scheduled for release but it is a key inflation reading. At 8:30 AM ET tomorrow, January’s Consumer Price Index (CPI) will be posted. The CPI measures inflationary pressures at the important consumer level of the economy. With exception to maybe the Employment report, the CPI is the single most important report that we see each month. Its results can have a significant impact on the financial markets, especially on long-term securities such as mortgage-related bonds. Inflation isn’t exactly a concern currently, but there are many that feel the Fed’s monetary policy decisions are going to fuel rapid inflation down the road, so analysts still track the readings closely. Current inflation readings will also influence the Fed’s decisions regarding rate increases. The report is expected to show a 0.1% decline in the overall index and a 0.1% rise in the more important core data that excludes food and energy costs. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall tomorrow morning.