Monday’s bond market has opened in negative territory despite some favorable economic news and a soft open in stocks. The major stock indexes are showing fairly minor losses with the Dow down 4 points and the Nasdaq down 22 points. The bond market is currently down 4/32 (2.33%), but I don’t believe we will see much of a change in this morning’s mortgage pricing.
October’s Industrial Production data was today’s only economic news. It showed that output at U.S. factories, mines and utilities fell 0.1% last month. This was weaker than the 0.2% increase that was expected and indicates that the manufacturing sector was softer than many had thought. That makes the data good news for bonds and mortgage rates, but since this report is considered to be only moderately important to the markets, we have seen little reaction to it.
The rest of the week has five more economic reports that are relevant to mortgage rates in addition to the minutes from last month’s FOMC meeting. A couple of the reports are considered highly important to the markets, meaning we could see noticeable movement in rates more than one day. This is especially true if stocks make a noticeable move higher or lower any particular day.
Tomorrow’s only report is October’s Producer Price Index (PPI) at 8:30 AM ET, which is one of the two key inflation readings on tap this week. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. Signs of rapidly rising inflation make long-term securities such as mortgage-related bonds less attractive to investors and leads to higher mortgage rates. The overall reading is expected to show a 0.2% decline from September’s level while the core data is expected to rise 0.1%. Weaker than expected readings would be good news for bonds and mortgage rates, while a larger than forecasted increase in the core reading could lead to higher mortgage rates Tuesday morning.
Overall, the most active day of the week will probably be Thursday with three reports being posted, one of which is the most important of the six scheduled. Wednesday afternoon also has the potential to be volatile if the FOMC minutes reveal a significant surprise. The best candidate for calmest day in rates is Friday. With data set for release four of the five days, it could end up being another active week for mortgage rates. Accordingly, please maintain contact with your mortgage professional if floating an interest rate and closing in the near future.