Tuesday's bond market opened in negative territory following the release of mixed inflation news, but like yesterday, has since recovered those losses. Also contributing to the rebound in bonds are losses in stocks. The stock markets are reacting negatively with the Dow down 80 points and the Nasdaq down 6 points. The bond market is currently down 2/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point.

The Labor Department gave us this morning's big news with the release of July's Producer Price Index (PPI). They reported a 0.6% rise in the overall reading that was much higher than the 0.1% that was expected. The good news came in the core data reading that rose 0.1% when it was expected to increase 0.2%. This means that overall prices rose more than expected at the producer level of the economy. However, if more volatile food and energy prices were excluded, prices rose less than expected. This eases some inflation concerns and helped prevent mortgage rates from spiking higher.

Also posted this morning was June's Goods and Services Trade Balance data. It revealed that the U.S. trade deficit stood at $58.1 billion in June. This was much lower than expected. But, this report usually is not much of an influence on bonds or mortgage rates.

There are two reports scheduled for release tomorrow. The more important of them is July's Consumer Price Index (CPI) at 8:30 AM. The CPI is one of the most important reports we see each month. It measures inflation at the consumer level of the economy. As with today's PPI, there are two readings in the report- the overall index and the core data reading. Current forecasts call for an increase of 0.1% in the overall and 0.2% in the core data reading. Smaller than expected increases should lead to a bond rally and lower mortgage rates. But if we see stronger than expected readings, mortgage pricing will likely move higher tomorrow.

At 9:15 AM tomorrow, Industrial Production data for July will be posted. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be of fairly high importance and may cause movement in mortgage rates. Analysts are currently expecting to see a 0.3% increase in production. A higher level of output could lead to higher mortgage rates tomorrow, while a weaker than expected figure should help push rates lower, assuming the CPI doesn't reveal any surprises.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
   

Wednesday's bond market opened fairly flat after this morning's economic news failed to show any major surprises. The stock markets are showing small gains with the Dow up 26 points and the Nasdaq up 10 points. The bond market is currently nearly unchanged form yesterday's close, but we will likely see an improvement of approximately .125 of a discount point in this morning's mortgage rates as a result of strength in bonds late yesterday.

The Labor Department said this morning that July's Consumer Price Index (CPI) rose 0.1% while the core data rose 0.2%. Both of those readings matched forecasts, therefore, the market had little reaction to the news.

Also released this morning was July's Industrial Production data. It showed that output at U.S. factories, mines and utilities rose 0.3% last month. This also matched forecasts and has had little influence on bond trading or mortgage rates.

Tomorrow's only monthly data is July's Housing Starts data. This report gives us an indication of housing sector strength and mortgage credit demand. However, it isn't considered to be of high importance to the bond market or mortgage pricing and usually doesn't cause much movement in mortgage rates unless it varies greatly from forecasts.

Also tomorrow, the Labor Department will post weekly unemployment claims. They are expected to show 315,000 new claims, but unless there is a significant variance from that level.

I am shifting back to the lock recommendation for immediate and short-term periods because it appears that the bond rally is losing steam. With a lack of significant data scheduled for release over the next few days that could drive rates lower, we likely will not see much of an improvement in rates. Accordingly, I am shifting back to locking since we have captured yesterday's gains.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

randy.reed@mpspecialists.com

This week brings us six pieces of economic data for the bond market to digest. The first is July's Retail Sales report early tomorrow morning. This data is very important to the financial markets and mortgage rates because it helps us measure consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, any data related to it can cause a fair amount of movement in the markets. A smaller than expected increase would indicate that consumers are spending less than previously thought, potentially slowing the economy. This is good news for the bond market and mortgage rates as it eases inflation concerns and makes long-term securities such as mortgage-related bonds more attractive to investors. Current forecasts are calling for an increase of 0.2%.





The next report is scheduled for release early Tuesday morning with the release of July's Producer Price Index (PPI). This index is considered to be an indicator of inflation at the producer level of the economy. There are two readings in the report- the overall index and the core data reading. The core data is more important because it excludes more volatile food and energy prices that can change significantly from month to month. Current forecasts call for an increase of 0.1% in the overall and 0.2% in the core data reading. A larger increase may raise inflation concerns and push mortgage rates higher Tuesday morning. If it reveals a smaller than expected increase, we could see mortgage rates improve as a result.

There are two reports due to be posted Wednesday. The most important of the three is July's Consumer Price Index (CPI) at 8:30 AM. The CPI is one of the most important reports we see each month. It measures inflation at the consumer level of the economy. As with Tuesday's PPI, there are two readings in the report- the overall index and the core data reading. Current forecasts call for an increase of 0.2% in the overall and 0.2% in the core data reading. Smaller than expected increases should lead to a bond rally and lower mortgage rates. However, stronger than expected readings will likely cause a spike in mortgage pricing.

At 9:15 AM Wednesday, Industrial Production data for July will be posted. This report gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is considered to be of fairly high importance and may cause movement in mortgage rates. Analysts are currently expecting to see a 0.3% increase in production. A higher level of output could lead to higher mortgage rates Wednesday, while a weaker than expected figure should help push rates lower, assuming the CPI doesn't reveal any surprises.

Thursday's only monthly data is July's Housing Starts data. This report gives us an indication of housing sector strength and mortgage credit demand. However, it isn't considered to be of high importance to the bond market or mortgage pricing and usually doesn't cause much movement in mortgage rates unless it varies greatly from forecasts. This report is the least important of the week's reports.

Friday morning, the University of Michigan will release its Index of Consumer Sentiment for August at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. A drop in confidence will probably boost bond prices, leading to lower mortgage rates. If the index rises, indicating that confidence is rising and spending is likely to continue, we may see mortgage rates move higher Friday.

Overall, look for the most movement in bond prices and mortgage rates the first part of the week. Monday, Tuesday or Wednesday may turn out to be the most important. I still feel there is a possibility of the bond market moving lower than much higher (pushing yields and mortgage pricing higher). This makes it prudent to consider locking an interest rate if closing in the immediate future. If we get stronger than expected results in the PPI and CPI releases, I fear that we may see mortgage rates spike higher fairly quickly. If those reports do further ease inflation concerns, I will likely be shifting to a float recommendation. But, the risk versus reward comparison still heavily favors the risk side in my opinion, therefore, I am holding the lock recommendations for the time being.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Wednesday's bond market has opened in negative territory following early stock market gains. The stock markets are continuing yesterday's late rally with the Dow up 69 points and the Nasdaq up 38 points. The bond market is currently down 15/32, which will likely push this morning's mortgage rates by approximately .125 to .250 of a discount point.

There is no relevant economic news scheduled for release today. This will leave the bond market subject to stock market swings. If the major stock indexes continue to rise, bonds will likely suffer and mortgage rates will rise. If stocks move into negative territory, we could see improvements to mortgage pricing.

Today does brings us the first of two Treasury auctions that may influence bond trading and possibly mortgage rates. The 10-year Note sale is being held today while 30-year Bonds will be sold tomorrow. If the sales are met with a lackluster interest from investors- particularly international buyers, the bond market may move lower after the results are posted. The end results will be announced at 1:00 PM each day. If there will be revisions to mortgage rates because of the results, look for them to be made during afternoon trading.

The Labor Department will post weekly unemployment claims numbers tomorrow morning. They are expected to show 310,000 new claims were filed last week. A higher number of claims would be good news for bonds, but this data usually does not influence bond trading or mortgage rates much because it covers only a week's worth of claims.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Friday's bond market has opened in positive territory following the release of favorable employment data. The stock markets are reacting negatively to the news with the Dow down 42 points and the Nasdaq down 12 points. The bond market is currently up 11/32, which will likely improve this morning's mortgage rates by approximately .250 of a discount point.

The Labor Department gave us this morning's data, saying that the unemployment rate rose to 4.6% last month and that only 92,000 new jobs were added to the economy. They also reported that the average hourly earnings rose 0.3%. The unemployment rate was higher than expected and the payrolls number was well below forecasts, leading to this morning's bond rally. The average earnings reading matched forecasts and hasn't influenced bond trading this morning.

This morning's data indicates that the employment sector was not as strong as thought. This is very good news for the bond market and mortgage rates. However, the recent sizable rally in bonds leads me to fear about profit taking by traders that could lead to an upward move in bond yields and mortgage rates. I would like to see some stability in bonds before I can comfortably say that rates are still headed lower. Without that, I am likely to hold the lock recommendations for at least the immediate and short-term periods.

Next week brings us the release of little economic news for the markets to digest. We do however, have another FOMC meeting on the calendar. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.