Today's Commentary

Updated on January 17, 2017 10:22:08 AM EST
Tuesday’s bond market has opened well in positive territory following the long weekend. Stocks are starting the week with minor losses of 18 points in the Dow and 25 points in the Nasdaq. The bond market is currently up 18/32 (2.33%), which should push this morning’s mortgage rates lower than Friday’s morning pricing by approximately .250 of a discount point.

There is nothing of importance scheduled for release today that is expected to affect mortgage rates. The rest of the week brings us the release of only four pieces of monthly economic data for the markets to digest, with one of them considered to be highly important for mortgage rates. The financial and mortgage markets were closed yesterday in observance of the Martin Luther King Jr. holiday.

Tomorrow has three reports that we will be watching. The first is December's Consumer Price Index (CPI) at 8:30 AM. This is one of the more important monthly reports for the bond market each month since it measures inflationary pressures at the consumer level of the economy. As with last week's Producer Price Index (PPI), there are two readings in the release. The overall index is expected to remain rise 0.3% from November's reading while the core data rose 0.2%. Weaker than expected readings would be favorable news and should lead to bond strength and lower mortgage rates tomorrow morning.

Next up is December's Industrial Production report at 9:15 AM ET. This data measures output at U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength or weakness. Current forecasts are calling for an increase in production of 0.6% from November's level. A weaker reading would be considered good news for bonds and could help lower mortgage rates as it would point towards a manufacturing sector that was softer than many had thought. However, the CPI report is more important to the bond market than this data is and will likely have a heavier influence on mortgage rates.

The third release tomorrow will be the Federal Reserve's Beige Book at 2:00 PM ET. This report is named simply after the color of its cover and details economic conditions throughout the U.S. by Fed region. Since the Fed relies heavily on it during their FOMC meetings, its results can have a fairly big impact on the financial markets and mortgage rates if it reveals any surprises. Of particular interest is information regarding inflation, unemployment or future hiring. If there is a reaction to the report, it will come during mid-afternoon trading.

Overall, tomorrow is the most important day of the week with three of the four monthly reports being released. There are several speaking engagements scheduled for Fed members throughout the week, so any surprises could also affect the markets and move mortgage rates. Therefore, please proceed cautiously and maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

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.

 ©Mortgage Commentary 2017
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