Tuesday’s bond market has opened in negative territory with stocks posting solid gains following economic news from overseas that was favorable to stocks. The Dow is starting the week with a 138 point gain while the Nasdaq is up 37 points. The bond market is currently down 5/32 (2.05%) which should push this morning’s mortgage rates higher by approximately .125 of a discount point from Friday’s morning levels. The financial and mortgage markets were closed yesterday for the Martin Luther King Jr. holiday.
There is nothing of importance scheduled for release today, leaving bonds to be driven by stock movement. The rest of the week brings us the release of four pieces of monthly economic data for the markets to digest, with one of them considered to be highly important for mortgage rates. Because the markets were closed yesterday and today has nothing set that is worth watching, all of this week’s relevant releases come over only three days.
The first data of the week is December’s Consumer Price Index (CPI) at 8:30 AM tomorrow. This is one of the more important monthly reports for the bond market each month since it measures inflationary pressures at the consumer level of the economy. As with last week’s Producer Price Index (PPI), there are two readings in the release. The overall index is expected to remain unchanged from November’s reading while the core data rose 0.2%. Weaker than expected readings would be favorable news and should lead to bond strength and lower mortgage rates tomorrow morning.
December’s Housing Starts will also be posted early tomorrow morning. It helps us measure housing sector strength and future mortgage credit demand by tracking construction starts of new homes. It is not considered to be one of the more important releases each month, so I don’t see it causing much movement in mortgage rates but does carry the potential to affect trading and rates if it shows a significant surprise. Analysts are expecting to see an increase in new home starts between November and December.
Overall, despite a relatively light week in terms of the number of economic reports scheduled, we still may see a very active week in the markets and mortgage pricing. In addition to our data there are also some key pieces of foreign economic data being released that can be highly influential and the volatility in our stocks markets will also play into this week’s bond trading and mortgage rates. This means there is a strong possibility of seeing intraday revisions to mortgage rates more than one day. Therefore, please maintain contact with your mortgage professional and proceed cautiously if still floating an interest rate and closing in the near future.