Wednesday, November 16, 2016 - Article by: James Brooks -
By James Brooks
The bond market is unchanged 3/32 (2.21%), which should keep today's mortgage unchanged.
October's Producer Price Index (PPI) was posted at 8:30 AM ET this morning, revealing no change in the overall reading and a 0.2% decline in the more important core data that excludes more volatile food and energy prices. Both readings were softer than expectations (+0.3% and +0.2%), meaning inflationary pressures were weaker than expected at the producer level of the economy. This is good news for bonds and mortgage rates because rising inflation makes long-term securities less appealing to investors.
Next up was October's Industrial Production data at 9:15 AM ET tomorrow. It showed no change from September's level of output, falling short of the 0.2% increase that was forecasted. This is a sign that manufacturing activity is not as strong as some analysts think, making the data good news also. Unfortunately, the market doesn't seem to be impressed as it gives up most of yesterday's gains.
Tomorrow has three economic reports scheduled that may have an impact on mortgage rates, all at 8:30 AM ET. The most important of them is October's Consumer Price Index (CPI) from the Labor Department. The CPI is the sister report to today's PPI, except it measures inflationary pressures at the consumer level of the economy and is one of the most important reports the bond market sees each month. If it reveals stronger than expected readings, indicating that inflationary pressures are rising at the consumer level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.4% increase in the overall reading and a 0.2% increase in the core data.
Also at 8:30 AM tomorrow will be October's Housing Starts. This report gives us an indication of housing sector strength, 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 an increase in starts of new homes, meaning the new home portion of the housing sector strengthened last month.
The final piece of data that we will be watching tomorrow is the weekly unemployment update. It is expected to show that 257,000 new claims for unemployment benefits were filed last week. That would be a small increase from the previous week's 254,000 new claims. The higher the number of initial filings, the better the news it is for mortgage rates because rising claims is a sign of a softening employment sector.
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.
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