By James Brooks

The bond market is currently up 4/32 (2.33%), which should improve Raleigh area mortgage rates by approximately .125 of a discount point.

Yesterday's 10-year Treasury Note auction was pretty well received with a couple of benchmarks pointing towards strong interest in the securities. Bonds did improve yesterday afternoon, but it was long after results of the auction were posted. Therefore, it is difficult to correlate the move with the auction. However, it does allow us to be optimistic about today's 30-year Bond sale. If it also draws a decent interest from investors, we could see bonds and mortgage rates improve slightly later today. Results will be announced at 1:00 PM ET, so any reaction will come during early afternoon trading.

We also saw the minutes from the September FOMC meeting yesterday afternoon. They showed some disagreement amongst Fed members about lagging inflation and how soon it will reach the Fed's preferred annual rate of 2.0%. However, the minutes also showed, despite the mixed inflation predictions, that a third bump to key short-term interest rates is all but a lock at this point. The consensus that another increase is "warranted", leaving market participants to predict it will come at December's FOMC meeting. The bond market had little reaction to the news.

September's Producer Price Index (PPI) was released at 8:30 AM ET this morning. It showed a 0.4% rise in both the overall and core readings. The overall reading pegged expectations, but the core data that excludes volatile food and energy prices rose more than the 0.2% that was expected. The jump indicates inflationary pressures were a little stronger at the producer level of the economy than many had thought. Although, some of the jump can be attributed to hurricane-related costs. Still, because bonds become less appealing to investors when inflation is rising, we should consider this data slightly negative for mortgage rates.

The second release of the morning was last week's unemployment update that showed only 243,000 new claims for unemployment benefits were filed last week. This was lower than the 255,000 that was expected and a noticeable decline from the previous week's revised 258,000 initial filings. Since falling claims indicates a strengthening employment sector, this was also unfavorable news for bonds and mortgage rates. Fortunately, this is only a weekly release and had little impact on today's trading and mortgage pricing.

Tomorrow has three economic reports scheduled for release, two of which are considered highly important. The Commerce Department will start with September's Retail Sales data at 8:30 AM ET. This data measures consumer level sales and is very important to the markets because consumer spending makes up over two-thirds of the U.S. economy. If consumer level spending is strong, overall economic growth is likely to be stronger, making bonds less attractive to investors. If we see weaker than expected readings in this report, the bond market should respond favorably and mortgage rates will probably improve tomorrow morning. Current forecasts are calling for a 1.6% increase in sales, although the sizable jump is being attributed to storm-related purchases. Good news for the bond market and mortgage pricing would be a much smaller increase.

Next up is September's Consumer Price Index (CPI), also at 8:30 AM ET. It tracks inflationary pressures at the very important consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see a 0.6% increase in the overall index and an increase of 0.2% in the core data. A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher.

The last release of the week will be posted by the University of Michigan at 10:00 AM ET tomorrow morning. Their Index of Consumer Sentiment for October will give us an indication of consumer confidence, which helps us measure consumers' willingness to spend. If consumer confidence in their own financial situation is rising, they are more apt to make large purchases. But, if they are growing more concerned about their job security or finances, they probably will delay making that large purchase. This influences future consumer spending data and can impact the financial markets. It is expected to show a reading of 95.5, meaning confidence rose from September's level of 95.1. A decline would be considered favorable news for bonds and mortgage rates because waning consumer spending usually translates into slower economic growth.

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... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.