Wednesday’s bond market has opened in negative territory following stronger than expected economic news. The stock markets are mixed with the Dow up 12 points and the Nasdaq down 21 points. The bond market is currently down 6/32 (1.98%), which with weakness late yesterday should push this morning’s mortgage rates higher by approximately .250 of a discount point.
Starting off today’s busy schedule was February’s Consumer Price Index (CPI) release at 8:30 AM ET. It showed a 0.2% decline in the overall reading and a 0.3% rise in the core data. The overall reading matched forecasts but the more important core reading that excludes volatile food and energy prices was stronger than the 0.1% increase that was forecasted. This means that prices on core products rose more than expected last month. Since that is an inflationary sign and bonds are less valuable during times of strengthening inflation, this is bad news for mortgage rates.
February’s Housing Starts data was also posted early this morning. The Commerce Department said that new home groundbreakings rose 7.2% last month, indicating growth in the sector. That was a larger jump than analysts were expecting to see, so we should also consider this data bad news for mortgage shoppers.
The final relevant economic report of the morning was February’s Industrial Production data at 9:15 AM ET that gave us a bit of good news. This report showed a 0.5% drop in output at U.S. factories, mines and utilities. Forecasts were calling for a 0.3% decline, meaning that industrial activity was weaker than expected. That makes the data good news for the bond and mortgage markets. However, since this is only a moderately important report it has not been able to erase the losses that came from the earlier releases.
Besides that data, we also have today’s adjournment of the two-day FOMC meeting at 2:00 PM to deal with. The general consensus is that Fed Chairman Yellen and company will not raise key short-term interest rates at this meeting, although some market participants feel it is possible. Even if no move is made, we will be closely watching the post-meeting statement for changes in verbiage that could indicate when their next move is likely to take place. Any surprises could heavily influence the markets and mortgage rates later today.
The FOMC meeting is ending a little earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by a press conference with Chairman Yellen. The meeting will adjourn at 2:00 PM, which is also when the Fed will update their economic projections. They will be followed by a press conference at 2:30 PM. These events will probably lead to afternoon volatility in the markets and mortgage rates.
Look for an update to this report shortly after the markets have had an opportunity to react to this afternoon’s events.