Until this morning, mortgage markets had been somewhat dormant over the course of the week. There was no new data for traders to chew, digest and/or spit out. Mortgage rates sat flat because of it.
Then, at 8:30 A.M. ET, the Commerce Department released Retail Sales data for September. Mortgage rates are headed higher this morning on its strength.
Retail Sales is an important data point because it reflects broader consumer spending patterns around the country. As two-thirds of the U.S. economy is tied to consumer spending, Retail Sales can be a terrific indicator of how fast the economy is growing (or shrinking).
Today, Retail Sales was shown to have increased 0.6% in September versus expectations of 0.2%.
Continuous growth in the economy eventually leads to inflation and that’s why mortgage rates are higher today. Inflation erodes the value of mortgage bonds which, in turn, pushes mortgage rates northward.
Despite starting higher, though, there are some chances for a U-Turn later this afternoon; four Federal Reserves members are scheduled to speak publicly. Chairman Ben Bernanke, Dallas Fed President Fisher, San Francisco Fed President Yellen, and Vice Chairman Kohn all make appearances.
Markets will be listening closely to the speeches for clues about what the Fed may do next to speed up or slow down the economy. The Fed meets again for a two-day meeting October 30-31.