Updated on July 13, 2020 10:03:16 AM EDT
There is nothing of importance scheduled for today. We are seeing weakness in bonds late Friday carry into this morning’s trading. Positive news on vaccine trials is helping to boost stocks and contribute to this morning’s bond selling also.
The rest of the week has six economic reports set for release that have the potential to influence mortgage rates. Also worth noting is that corporate earnings season is beginning this week, meaning stocks may be fairly active.
Junes Consumer Price Index (CPI) starts this week’s events at 8:30 AM ET tomorrow. This is very important data because it measures inflationary pressures at the consumer level of the economy. Rapidly rising inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors. It is expected to show a 0.5% rise in the overall reading and a 0.1% increase in the core data. The core reading is the more important of the two since it excludes more volatile food and energy prices, revealing a more reliable inflation measurement. Last week’s Producer Price Index (PPI) gave us much weaker than expected readings. If we see similar results in the CPI, the bond market should react favorably and possibly lower rates. However, a larger than expected rise in the core reading could send mortgage rates higher tomorrow morning.
Corporate earnings season begins this week, where publicly traded companies report their quarterly and annual earnings results and projections. They generally affect stocks directly and not mortgage rates. Although, stock gains usually pressure bonds while stock losses cause funds to shift into bonds, lowering mortgage rates. The heart of the announcements will start next week, but there are enough scheduled this week to affect the markets as they are the first signs of how the pandemic has negatively affected corporate income and profits. The previous earnings releases also covered parts of the 1st quarter that preceded the pandemic shutdown. These can come into play any day this week. Weaker than expected earnings should cause stock losses and bond gains that would push mortgage rates lower.
Overall, Thursday is the best candidate for most active in rates while Friday may be the calmest. With corporate earnings being the wildcard that can cause volatility any day this week, don’t be surprised to see plenty of movement in rates and possibly intraday revisions multiple days. If floating an interest rate and closing in the near future, it would be prudent to keep an eye on the markets for unexpected changes.
©Mortgage Commentary 2020