AM Market Quote

Tuesday’s bond market has opened up slightly following the release of mixed economic news and a calm opening in stocks. The major stock indexes are showing minor losses with the Dow down 12 points and the Nasdaq down 10 points.

Today’s only relevant economic data was November's Consumer Price Index (CPI) at 8:30 AM ET. The Labor Department announced that the overall reading was unchanged from October’s level and the core data rose 0.2%. The overall reading was weaker than expected (+0.1%) while the core data slightly exceeded forecasts of +0.1%. This indicates that inflationary pressures at the consumer level of the economy remained subdued last month. Generally speaking, that is good news for the bond market. However, since the core reading that excludes volatile food and energy prices rose more than thought, we should consider the data neutral towards mortgage rates.

Tomorrow is the key day of the week. It starts off with three months of Housing Starts data and then proceeds into an afternoon of Fed events. Due to the government shutdown in October and problems collecting data last month, we will see Housing Starts for September, October and November at 8:30 AM ET tomorrow. This data isn’t known to be highly influential on bonds or mortgage pricing. It does give us an indication of housing sector strength by tracking new home groundbreakings, so it is worth watching. All three months are expected to show increases, indicating strength in the new home portion of the housing sector. Slowing starts would be favorable for the bond market, although a wide variance is likely needed for the data to cause noticeable movement in the markets or mortgage rates.

The Fed scheduled starts at 2:00 PM ET when this week’s two-day FOMC meeting adjourns. It is widely expected that Mr. Bernanke and company will not change key short-term interest rates at this meeting, but traders and analysts are anxious to get the Fed's current economic forecasts and any word of a potential reduction in the Fed’s current bond buying program. Also worth noting is that the meeting is ending earlier than the traditional 2:15 PM because it is one of the meetings that will be followed by updated economic forecasts from the Fed and a press conference hosted by Chairman Bernanke. The forecasts will be posted at 2:00 PM and the press conference will begin at 2:30 PM. It is fairly safe to assume that all of that will lead to afternoon volatility in the markets and mortgage rates Wednesday.

 

Because of potential volatility I am suggesting to lock your rate at this point. For daily updates on the mortgage and real estate industry here in Texas and throughout the country please follow this blog.