Wednesday’s bond market has opened in positive territory following weaker than expected economic data. The stock markets are calm as it seems everyone is waiting for this afternoon’s events to take place before making a move. The Dow is currently up 16 points while the Nasdaq is up 5 points. The bond market is currently up 5/32 (2.57%), but we will likely see an increase in this morning’s mortgage rates of approximately .125 of a discount point due to weakness late yesterday.
August’s Consumer Price Index (CPI) was today’s only relevant economic data. It was posted at 8:30 AM ET, revealing a 0.2% decline in the overall reading and no change in the more important core data. Both readings were weaker than forecasts, indicating consumer-level inflation remained subdued and softer than analysts thought. That is good news for bonds because rising inflation makes longer term securities less appealing to investors.
We have plenty more taking place today that is relevant to mortgage rates. There are technically three Fed events, all less than an hour apart, that are likely to heavily influence the financial and mortgage markets. They start with the 2:00 PM ET adjournment of the FOMC meeting that began yesterday. It is widely expected that Fed Chair Janet Yellen and friends will not change key short-term interest rates at this meeting, but there is plenty of interest in the markets regarding when they will take the first step towards raising rates. The post-meeting statement will be released at the adjournment. Market traders will be looking for any changes to their previous statement.
This FOMC meeting is one that will be followed by updated economic predictions and a press conference with Chair Yellen. Traders will be looking for any revisions to the Fed’s outlook on unemployment, GDP growth, inflation and their timetable for keeping key interest rates at current levels. The economic forecasts will also be released at 2:00 PM ET while the press conference will start at 2:30 PM. All this will most likely 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 the Fed events. There is some minor economic data scheduled for release tomorrow, but they will be addressed in this afternoon’s update.