Friday’s bond market has opened in negative territory following slightly stronger than expected inflation news. Stocks are mixed but relatively calm during early trading with the Dow down 11 points and the Nasdaq up 11 points. The bond market is currently down 5/32 (2.21%), which should push this morning’s mortgage rates higher by approximately .125 of a discount point over Thursday’s early pricing. We did see some late strength in bonds yesterday, but I believe we will still see a small increase in today’s rates.
Today’s only relevant economic data was a key consumer inflation reading at 8:30 AM ET. April’s Consumer Price Index (CPI) revealed a 0.1% increase in the overall reading, matching forecasts. The slightly negative news came in the core data that showed a 0.3% rise, exceeding forecasts of a 0.2% increase. This means that inflationary pressures excluding food and energy prices, rose more than expected. Since rising inflation makes bonds less attractive to investors and allows the Fed to raise short-term rates sooner, we should consider this morning’s data bad news for mortgage shoppers.
Fed Chair Janet Yellen will be speaking in Rhode Island at 1:00 PM ET today. The topic of her speech is related to economic activity, so her words could cause volatility in the markets if she says anything surprising. Furthermore, the bond market will close at 2:00 PM ET day ahead of the Memorial Day weekend and reopen Tuesday morning. Stocks are open for a full day today but will be closed Monday also.
Next week has a handful of relevant economic reports along with a couple of potentially influential Treasury auctions. Some of the data is scheduled for Tuesday morning when the markets reopen. Look for details on those and all of next week’s schedule in Sunday evening’s weekly preview.