Mortgage Market Update
This week has only three economic reports that we will be watching along with two Treasury auctions. All of the data and auctions will take place the mid and latter days. The week starts off light with nothing of importance scheduled tomorrow or Tuesday.
February's Consumer Price Index (CPI) will start this week's calendar, coming Wednesday morning at 8:30 AM ET. It measures inflationary pressures at the very important consumer level of the economy. The overall CPI is expected to show a 0.4% rise and the more influential core data is expected to rise 0.2%. The core data will draw more attention because it excludes more volatile food and energy prices, giving us a more stable reading of inflation. Good news for bonds and mortgage rates would be weaker readings, especially considering all the recent talk of future inflation concerns.
The 10-year Treasury Note auction will take place Wednesday while 30-year bonds will be sold Wednesday. Results of both sales will be posted at 1:00 PM ET on the sale days. If investor demand was high, we may see bonds rally during afternoon trading. However, weak demand in the sales could lead to selling and an increase in mortgage rates late Wednesday and/or Thursday. It will be interesting to see how strong demand will be following the recent spike in bond yields.
Thursday's sole monthly report is February's Producer Price Index (PPI) at 8:30 AM ET. This is the sister release to the CPI except it measures inflationary pressures at the producer level of the economy. As with the CPI, there are two portions of the index- the overall reading and the core data. A large increase would fuel inflation concerns, making long-term investments such as mortgage-related bonds less attractive to investors. Rising inflation also allows the Fed to be more aggressive with key short-term interest rates. The overall reading is expected to increase 0.4% while the core reading is forecasted to rise 0.2%. Weaker readings would be favorable for mortgage rates.
The final release of the week is the University of Michigan's Index of Consumer Sentiment for March at 10:00 AM ET Friday. This index gives us a measurement of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, then they are more apt to make large purchases in the near future. This helps fuel consumer spending levels and economic growth. A drop in confidence would be considered good news for rates. It is expected to show a reading of 79.0, up from February's final reading of 76.8.
Overall, the inflation reports will draw plenty of attention this week. Since the pandemic started, inflation hasn’t been much of a concern due to the economic shutdown. Now that restrictions have been lifted in many states and a new round of stimulus looks to be coming soon, the topic is in the forefront. Wednesday looks to be the most important day of the week due to the CPI release and the 10-year Note auction while Tuesday may be the calmest day for rates. However, as we saw last week, the markets can get active at any time without notice. Therefore, keep a close eye on them if still floating an interest rate and closing in the near future.