Mortgage investors are putting the finishing touches on their risk management positions this morning before largely slipping out early this afternoon for what promises to be a very nice last weekend of summer for much of the country.
The Labor Department released its August Consumer Price Index data earlier this morning – and mortgage investors yawned. The headline measure of inflation at the consumer level showed a gain of 0.3% last month – slightly stronger than expected – but that gain was offset by the unexpectedly flat reading for the more important core component of the index (a value which excludes volatile food and energy costs). The year-over-year rate of both headline and core consumer price inflation remains stable at 1.0% -- a condition that sharply reduces the likelihood of a pronounced and sustained upward move for mortgage interest rates – at least in the near-term.
Looking ahead to next week the Federal Open Market Committee will huddle for a one-day monetary policy strategy discussion on Tuesday, September 17th. Central bankers will weigh their diverging views on the how the economy is likely to perform next year and will debate their respective theories on how best to re-fire the nation’s economic engines. When they release their post-meeting statement at 2:15 p.m. ET it will likely reveal the Fed chose to remain on the sidelines and watch a bit longer before taking any form of action. Such an outcome is already priced into the mortgage market -- so if this assessment proves accurate -- the Fed meeting will be a nonevent with respect to the current trend trajectory of mortgage interest rates.
News from the housing sector will dominate the balance of next week’s economic calendar – ranging from Tuesday morning’s August Housings Start and Building Permit numbers through the existing and new home sales data on Thursday and Friday respectively. The collective story is expected be one of almost imperceptible improvement – a condition not likely to cause mortgage investors to aggressively push mortgage interest rates notably higher.
For the remainder of the day look for mortgage interest rates to take their directional cue from trading action in the stocks markets. Higher stock prices will tend to draw mortgage interest rates fractionally higher. With mortgage note rates currently floating either at, or within a breath of their all-time historical lows, falling stock prices will not likely serve to push these note rates appreciably lower – though mortgage investor pricing may improve a little. From a technical perspective I continue to see reasons to believe the Dow will probably put in a multi-day high between 10550 and 10650 -- perhaps before the close of trading today.