Tuesday’s bond market has opened well in positive territory following quite favorable economic news. Stocks are showing early losses of 138 points in the Dow and 408 points in the Nasdaq. The bond market is currently up 12/32 (4.56%), but a late afternoon sell-off yesterday is going to limit the improvement in this morning’s mortgage rates to approximately .125 of a discount point. If you saw an intraday increase or two yesterday afternoon, you should see a larger improvement this morning as those losses are reversed in today’s pricing.

Kicking off this week’s highly important economic calendar was June's Consumer Price Index (CPI) at 8:30 AM ET this morning. It revealed inflation at the consumer level of the economy was much softer than expected, fueling this morning’s bond rally. The overall CPI for June fell 0.4% while the more important core data that excludes volatile food and energy costs was unchanged. They were expected to be down 0.1% and up 0.2% respectively. More good news came in the year-over-year readings that were lower than expected to indicate inflation slowed last month.

We also have the first day of the Fed’s semi-annual update to Congress this morning. Fed Chairman Warsh will be speaking before the House Financial Services Committee on the status of the economy and monetary policy today, then will do so to the Senate Banking Committee tomorrow morning. Nothing surprising has been said yet, so we are looking for a possible reaction to something in the Q&A portion of the proceeding shortly. Key points of interest include overall economic growth, inflation and what the Fed plans to do to control both.

In addition to Chairman Warsh’s second day of testimony, there are also two reports set for release that we will be watching tomorrow. June's Producer Price Index (PPI) will be posted at 8:30 AM ET tomorrow. The PPI measures inflationary pressures at the wholesale level of the economy, compared to the consumer level that today’s version covered. A large increase would fuel concerns about rising wholesale inflation, which would likely be passed on to consumers in the immediate future. Analysts are expecting to see a 0.2% rise in the overall reading and a 0.4% increase in the core data. On an annual basis, the overall PPI is predicted to decline but the core data is expected to rise. Good news for mortgage shoppers would be weaker than forecasted readings, especially in the year-over-year numbers.

The Federal Reserve's Beige Book report is set to be released at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover but details economic activity and conditions in the U.S. by Fed region through the eyes of their business contacts. The information in this report is used to make monetary policy decisions during the Fed’s FOMC meetings. Accordingly, if there are any significant changes in conditions since the last update, we could see an afternoon move in the markets and mortgage rates tomorrow. Signs of slowing economic growth and/or softer inflation would be favorable news for rates.

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.