This week brings us the release of five important economic reports for the bond market to digest. Several of these reports are considered to be of high importance, meaning we will likely see volatility in the financial markets and mortgage pricing over the next several days. There are also plenty of corporate earnings releases scheduled for the stock market thi s week along with the recent geopolitical events in the Middle East that could add additional volatility to stocks and lead to changes in bonds and mortgage rates. Throw in a few days of Fed testimony and we have the makings for a very interesting week.

The first piece of data comes Monday morning with the release of June’s Industrial Production data at 9:15 AM ET. This data measures output and U.S. factories, mines and utilities, giving us an indication of manufacturing sector strength. It is expected to show a 0.4% rise in production, indicating that the manufacturing sector showed moderate growth during the month. A smaller than expected increase would be good news and could help push mortgage rates slightly lower.

Tuesday’s big news is the release of June’s Producer Price Index (PPI). The PPI is very important because it measures inflationary pressures at the producer level of the economy. It is expected to show a 0.3% increase in the overall reading an d a 0.2% rise in the core data reading. The bond market should react quite favorably to weaker than expected readings, but a bigger than expected jump in the core reading could send mortgage rates higher.

Next on tap is Wednesday’s release of June’s Consumer Price Index (CPI). It is a mirror of Tuesday’s PPI with the exception that the CPI measures inflation at the more important consumer level of the economy. Analysts have forecasted a 0.2% increase in the overall index and a 0.2% rise in the core data. The core data is considered to be the key reading of both the PPI and CPI because they exclude more volatile food and energy prices, giving us a more stable measure of inflation. Higher than expected readings could raise inflation fears and push mortgage rates higher both days.

Also due to be posted Wednesday morning is June’s Housing Starts report. This data gives us an indication of housing sector strength, but is not considered to be of hig h importance. Analysts are currently expecting to see a decline in new starts of housing projects. With the CPI being posted at the same time, I don’t see this data having an impact on mortgage rates Wednesday.

Fed Chairman Bernanke will speak before the Senate Banking Committee Wednesday morning at 10:00am ET. His testimony will be broadcasted and will be watched very closely. Analysts and traders will be looking for the status of the economy and his expectations of future growth, particularly inflation concerns. This should create a great deal of volatility in the markets during the testimony and the question and answer session that follows. If he indicates that inflation is a threat to the economy, we will likely see the bond market tank and mortgage rates rise.

It is extremely difficult to predict what he will say. Regardless, I am expecting to see a fair amount of movement in mortgage pricing Wednesday morning and early afternoon. He will r epeat his testimony before the House Financial Services Committee Thursday morning, but is not expected to vary his speech much from Wednesday’s. This makes it likely that his testimony Thursday will have little impact on mortgage rates.

The only other report of any relevance scheduled for this week is June’s Leading Economic Indicators (LEI) at 10:00 AM Thursday. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of relative importance to the bond market. It is expected to show a 0.1% increase, meaning that we may see a slight increase in economic activity over the next few months. A decline in the index would be good news for the bond and mortgage markets.

Also worth noting is Thursday’s release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release, espec ially if they show some divisiveness by its members when voting for the last increase to key short-term interest rates. Overall though, I think we will see the most movement in mortgage pricing this week on Tuesday or Wednesday due to the release of the inflation related indexes and Mr. Bernanke’s testimony.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float 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… 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.

a la mode