Tuesday’s bond market has opened in negative territory despite slightly favorable economic news. The stock markets are calm with the Dow down 12 points and the Nasdaq nearly unchanged from yesterday’s close. The bond market is currently down 7/32 (2.29%), which may push this morning’s mortgage rates slightly higher.
There were two economic reports posted this morning. The first was October’s Consumer Price Index (CPI) at 8:30 AM ET. The Labor Department announced that the overall reading rose 0.2% as did the more important core data that excludes more volatile food and energy prices. Both of these pegged forecasts, meaning there was no surprise pressure or weakness of inflation at the consumer level of the economy. The readings likely won’t alter any thought process about the Fed’s expected rate hike next month.
October’s Industrial Production data was posted mid-morning today, revealing a 0.2% decline in output at U.S. factories, mines and utilities. An increase of 0.1% was expected, indicating that the manufacturing sector may be softer than many had thought. That makes the data good news for the bond market and mortgage rates because it points towards economic weakness. However, this particular report does not carry enough importance in the market to cause a bond rally.
Tomorrow’s only economic data that is worth watching is October’s Housing Starts. This report gives us an indication of housing sector strength by tracking new home groundbreakings, but usually does not have a noticeable impact on mortgage rates. I don’t expect this month’s version to be any different unless it varies greatly from analysts’ forecasts. It is expected to show a drop in starts of new homes, meaning the new home portion of the housing sector softened last month.
We also have the minutes from the last FOMC meeting being posted tomorrow afternoon that has the potential to heavily influence the financial and mortgage markets. Traders will be looking for any indication of the Fed’s next move regarding monetary policy, particularly when the first rate increase will come. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising regarding when the Fed will raise key short-term interest rates, we will see some movement in rates tomorrow afternoon.