Current mortgage rates move higher or lower for home purchasers or refinancers when economic and political conditions are clear.  Unfortunately, when economic and political conditions are not clear mortgage rates tend to move higher.  Today will begin with this later scenario in play.  Economic data is mixed—there are some positive signs and some negative signs.  The US political situation can, at best, be considered uncertain.  Hence mortgage rates will feel pressure to rise today.

Several economic reports were released this morning paint a muddled picture.  The two most important reports were the retail sales report and the Producer Price Index.  Both of these reports came in better than analyst estimates.  However, even the internal components within the reports are muddled.  Retail sales increased overall, but without auto sales the results would have been negative.  Inflation appears to have dropped from the headline number from the PPI report, yet eliminating the volatile food and energy components and we see an increase in prices.

The other key report this morning was the weekly Jobless Claims report.  New applicants for first-time jobless benefits fell significantly yet still exceed the 400,000 threshold that analysts indicating stability.

Clearly the data released today is an impressionist painting—perhaps it will look clearer from some distance.  But for today the “fuzziness” of the data is creating uncertainty and that will translate into higher rates as protection against the unknown.

The other important issue impacting rates today is the debt ceiling and deficit cutting negotiations going on in Washington.  Following a day in which the negotiations became extremely heated and produced no deal, a major debt ratings firm announced that it was placing the AAA credit rating of the US on review for possible downgrade.  Perhaps this dose of reality and a chorus of comments from business leaders of every political persuasion describing the disaster that would occur without a deal will shame the President and congressional Republicans into a deal.  However, while we wait for action, pressure for higher rates mounts.

Tomorrow is another busy day for data.  Consumer prices and industrial production figures are the most important reports released tomorrow.  Also released will be looks at manufacturing activity in the Northeast US and consumer sentiment.

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