Friday’s bond market has opened in negative territory as profit-taking and early stock gains pressure bonds. The major stock indexes are showing moderate gains with the Dow up 79 points and the Nasdaq up 27 points. The bond market is currently down 25/32 (1.81%), but due to strength late yesterday, today’s increase in rates should be limited to approximately .125 of a discount point if comparing to yesterday’s morning pricing.
The first of this morning’s three economic reports was December’s Consumer Price Index (CPI) at 8:30 AM. It revealed a 0.4% decline in the overall reading and no change in the core data that excludes food and energy costs. The overall reading pegged forecasts while the core reading was slightly weaker than the 0.1% increase that was expected. That makes the data slightly favorable for bonds and mortgage rates because it shows inflation is still not a threat at the consumer level of the economy.
Next up was December’s Industrial Production report at 9:15 AM ET. This release revealed a 0.1% decline in production at U.S. factories, mines and utilities. That matched forecasts and hints that the manufacturing sector was fairly flat last month. Therefore, we should consider the results neutral for the bond and mortgage markets.
January’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment finished out this week’s calendar just before 10:00 AM ET. It came in at 98.2, exceeding forecasts of 94.1 by a fairly wide margin. That means surveyed consumers were much more optimistic about their own financial and employment situations than many had thought. Because rising confidence usually translates into higher levels of consumer spending, we should consider this report to be bad news for mortgage rates.
The financial and mortgage markets will be closed Monday in observance of the Martin Luther King Jr. holiday. There is no early close today ahead of it. Next week brings us a couple of relevant reports, but none are considered to be key or highly important to mortgage rates. We will address next week’s activities in Sunday evening’s weekly preview.