This week has four economic reports scheduled for release that are relevant to mortgage rates in addition to the minutes from last month's FOMC meeting. One of the reports is considered highly important to the bond market, so we may see a decent amount of movement in rates this week. This is especially true if stocks make a noticeable move higher or lower any particular day.
October's Consumer Price Index (CPI) from the Labor Department will start the week’s calendar at 8:30 AM ET Tuesday. The CPI measures inflationary pressures at the consumer level of the economy and is one of the more 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 0.2% rise in the overall reading and a 0.2% increase in the core data that excludes more volatile food and energy prices.
Also Tuesday morning will be the release of October's Industrial Production data at 9:15 AM ET. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to reveal a 0.1% increase in production, indicating little strength in the manufacturing sector. Stronger levels of production would be considered bad news for the bond market and mortgage rates, but this report is not expected to greatly influence the markets. Therefore, it will likely take a sizable variance from forecasts for it to have a noticeable impact on mortgage pricing.
October's Housing Starts is Wednesday's only economic data worth watching. 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 a drop in starts of new homes, meaning the new home portion of the housing sector softened last month.
However, also worth noting is the release of the minutes from the last FOMC meeting Wednesday afternoon that can have an impact on the financial and mortgage markets. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly when the first rate increase will come. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising regarding when the Fed will raise key short-term interest rates, we will see some movement in rates Wednesday afternoon.
The final report of the week will come from the Conference Board at 10:00 AM ET Thursday, when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.5% increase, meaning economic activity will likely rise fairly quickly over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to miss forecasts by a wide margin from forecasts for it to affect mortgage rates.
Overall, the most active day of the week will probably be Tuesday or Wednesday with two reports being posted each day. The best candidate for calmest day in rates is Friday as we may see reaction to the Paris terrorist attack tomorrow.