Monday’s bond market has opened in negative territory, erasing gains from late Friday. The stock markets are starting the week in positive ground with the Dow up 69 points and the Nasdaq up 21 points. The bond market is currently down 13/32 (1.74%), but due to strength Friday afternoon we should see little change in this morning’s mortgage rates if comparing to Friday’s early pricing. If your lender revised rates lower Friday afternoon, you may see an increase this morning by the same amount.
There is nothing of importance set for release today. It is the only day of the week that has nothing scheduled that is relevant to mortgage rates. The rest of the week brings us the release of five pieces of economic news in addition to the minutes from the most recent FOMC meeting. Only one of the economic reports is considered to be highly important to the markets and mortgage rates, but a couple do carry enough significance to influence mortgage rates if they show a wide variance from forecasts.
The majority of the data comes tomorrow morning with three releases set. April’s Consumer Price Index (CPI) will kick off the week’s calendar at 8:30 AM ET tomorrow. This is the sister report of last week’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any significant surprises. Current forecasts are calling for a 0.3% increase in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two readings as it excludes more volatile food and energy prices. This data can also affect the Fed’s timeline for raising key short-term interest rates and will also help dictate mortgage rate direction.
April’s Housing Starts will also be posted early tomorrow morning. This report will give us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new construction starts from March’s reading, hinting at housing sector growth. However, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts and the CPI matches expectations.
The third piece of data tomorrow is April’s Industrial Production report at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% increase in production, indicating that manufacturing activity strengthened slightly. A decline in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is considered to be moderately important, so it will likely need to show unexpected strength or weakness to cause movement in mortgage rates.
Overall, I believe tomorrow will be the most important day for rates due to the data being posted. Wednesday afternoon could also be pretty active if the minutes show anything of importance. The calmest day will likely be Thursday. Despite a relatively light calendar, I still recommend maintaining contact with your mortgage professional if you have not locked an interest rate yet as conditions can change at any time.