September 16th, 2009 10:40 AM by Mel Samick
Wednesday's bond market opened in positive territory following the release of this morning's key inflation data that showed no significant surprises, but has since given back those gains. The stock markets are in positive ground with the Dow up 40 points and the Nasdaq up 11 points. The bond market is currently down 2/32, which will likely push this morning's mortgage rates a little higher.There were two reports posted this morning. The first was August's Consumer Price Index (CPI) that revealed a 0.4% increase in the overall reading and a 0.1% rise in the core data. The increase in the overall reading was slightly higher than forecasts, but the more important core data reading that excludes volatile food and energy prices matched expectations. This means that prices at the consumer level of the economy rose modestly last month. That is good news for bond prices and mortgage rates because rapid increases in inflation makes long-term securities such as mortgage-related bonds less attractive to investors. The end result is almost always higher mortgage rates for borrowers.The second report of the day was August's Industrial Production data. It showed a 0.8% increase in production at U.S. factories, mines and utilities. This was slightly more than expected, meaning manufacturing activity was a little stronger than thought. However, the difference was not enough to cause much concern in the bond market. Tomorrow's data is much less important to the markets than the reports released the past two days. The Labor Department will give us last week's unemployment filings. They are expected to announce that 555,000 new claims for unemployment benefits were filed last week. This would be a small increase from the previous week, but unless we see a wide variance between forecasts and the actual number, this data likely will have little impact on tomorrow's mortgage pricing .August's Housing Starts report will also be posted early tomorrow morning. This report is also considered to be low-to-moderately important and will probably not have a significant impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand. It is expected to show little change in starts of new home construction between July and August.