June 18th, 2009 8:15 AM by Lehel Szucs
Wednesday's bond market has opened in positive territory following the release of this morning's key inflation data. The stock markets are relatively flat with the Dow up 3 points and the Nasdaq up 7 points. The bond market is currently up 11/32, which will likely lead to an improvement if approximately .375 of a discount point in this morning's mortgage rates.
The Labor Department reported that their Consumer Price Index (CPI) rose on May 0.1%. They also said that the core data that excludes more volatile food and energy prices rose 0.1%. The overall index was expected to rise 0.3% while the core data matched forecasts. This indicates that prices at the consumer level of the economy remained in-check last month. Some market participants had feared that inflation may be strengthening and that the Fed may need to raise key short-term interest rates sometime in the near future.
Today's report also gave us an interesting stat that is worth mentio ning though. The 0.1% rise in the overall reading brought the total decline over the past 12 months down to 1.3%. That is the largest annual decline in the CPI since 1950. But it is no surprise that the biggest contributors to that fall are gas and energy prices. However, as long as these inflation indexes show results that indicate inflation is not gaining steam, investor and Fed concerns should remain minimal. This is good news because if the Fed becomes concerned about inflation, we would likely see bonds fall considerably and mortgage rates rise sharply.
May's Leading Economic Indicators (LEI) will be posted late tomorrow morning. The Conference Board, who is a New York-based business research group, will post this data at 10:00 AM ET. It attempts to predict economic activity over the next three to six months. If it shows rapidly rising levels of activity, bond prices will probably drop, pushing mortgage rates slightly higher tomorrow morning. But, a weak er than expected reading could lead to lower mortgage pricing. It is expected to show a 0.9% increase.
The Labor Department will give us last week's unemployment figures. They are expected to say that 602,000 new claims for unemployment benefits were filed last week. This would be close to the previous week's number of claims. However, this data usually has little influence on bond trading and mortgage rates unless it varies greatly from forecasts.
If I were considering financing/refinancing a home, I would.... Float if my closing was taking place within 7 days... Float 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.
©Mortgage Commentary 2009