Monday’s bond market has opened in negative territory following weekend news from the Middle East that has oil prices higher. Stocks are mixed with the Dow up 81 points and the Nasdaq down 242 points. The bond market is currently down 7/32 (4.58%), which with weakness late Friday should cause this morning’s mortgage rates to be higher than Friday’s early pricing by approximately .250 - .375 of a discount point.

Today is the only day of the week that doesn’t have at least one relevant economic report set for release. The negative open in bonds almost exclusively due to oil prices moving upward as a result of the flare up in military action in the Middle East this weekend. President Trump’s comments this morning that indicate the U.S. will end up controlling the critical Strait of Hormuz means the conflict is likely far from over. As oil prices and the cost we pay at the pump continue to rise, inflation fears become stronger in the bond market. This leads to bond prices declining, pushing yields and mortgage rates higher.

The remainder of the week has plenty scheduled that has the potential to affect mortgage rates, including three economic reports that are considered to be highly important. There are also several Fed-member speaking engagements, including two days of congressional testimony by Chairman Warsh and a periodic Fed update on economic conditions in the U.S. Furthermore, we are watching for corporate earnings releases to move stocks enough to possibly bring additional funds into the bond market if earnings disappoint and obviously, more headlines from the Middle East.

The week’s first scheduled event is the release of June's Consumer Price Index (CPI) at 8:30 AM ET tomorrow. This very important data measures inflationary pressures at the consumer level of the economy. Bonds are extremely sensitive to inflation data because it affects the value of their future fixed interest payments and is a contributing factor in what the Fed decides to do with short-term rates. Analysts are expecting to see a 0.1% decline in the overall reading and a 0.2% increase in the core data that excludes volatile food and energy costs. They are both predicted to move a little lower on an annual basis. If we see weaker than predicted results, the bond market should react favorably and mortgage rates will likely move lower. However, stronger than expected inflation readings could send mortgage rates noticeably higher tomorrow.

Also tomorrow is day one of Fed Chairman Warsh's two-day semi-annual testimony before Congress. He will be updating the House Financial Services Committee on the status of the economy and monetary policy, then will do so to the Senate Banking Committee Wednesday morning. There is a good possibility of seeing the markets react to his words, possibly leading to a change in mortgage rates tomorrow. He will be speaking at 10:00 AM both days, followed by Q&A from the committee members. We usually see a much stronger reaction to something said during the first day of the proceedings because his prepared statement on day two often is the same as the first day.

Overall, tomorrow is the most important day for rates due to the influence CPI carries in the markets and Fed Chairman Warsh’s congressional testimony. Wednesday and Thursday also have reports scheduled that will draw plenty of attention, meaning large changes in rates are possible those days also. No particular day stands out as a clear candidate for calmest. We should see an active week for rates, so it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock 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.