This week brings us the release of only four relevant monthly economic reports, one of which is considered to be highly important. In addition to the data, we will also have a Treasury auction and several Fed events that may influence rates heavily. The week starts off light with nothing of importance set for tomorrow.
February's Retail Sales data will start this week's calendar early Tuesday morning. This data is extremely important to the financial markets because it measures consumer spending strength. Since consumer spending makes up over two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month's report is expected to show a 0.6% decline in sales. If it reveals a larger decline, the bond market should react favorably, pushing mortgage rates lower. An unexpected increase would be bad news for mortgage rates.
Also Tuesday morning will be the release of February's Industrial Production report, at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.5% rise from January's level. A decline would be considered favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness. Broader economic growth would be more difficult if manufacturing activity is slipping.
This week’s 20-year Treasury Note auction will take place Tuesday. Results of it will be announced at 1:00 PM ET, making this an afternoon event for rates. If the sale draws a strong demand from investors, we could see bonds improve during early afternoon trading, possibly leading to a slight downward revision to mortgage pricing. On the other hand, weak interest in the securities could cause an upward revision to rates Tuesday afternoon.
Wednesday has one report scheduled for early morning and an afternoon of Fed events that will draw plenty of attention. February's Housing Starts will begin the day at 8:30 AM ET. This data gives us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show a decline in new construction starts and permits, revealing housing sector weakness. Traders normally don’t consider this report to be of high importance to the bond market, meaning it likely will have little impact on mortgage rates unless it reveals a large decline or increase.
The Fed events start with the 2:00 PM ET adjournment of the two-day FOMC meeting that begins Tuesday. There is a strong consensus that Fed Chairman Powell and friends will leave key short-term rates unchanged at this meeting. Since the non-move won't come as a surprise, market participants will be focused on the Fed's timetable for future actions, such as changes to their bond buying program, inflation risks and when they may expect to raise rates. If the post-meeting statement gives any hints of a rate hike coming sooner than currently expected, the bond market may react in a negative manner that would be unfriendly for mortgage rates. Reassurances from them that current economic conditions call for a patient approach and no timetable is set for the next rate hike, we should see bonds and mortgage rates improve.
Along with the adjournment is the post-meeting statement. That is also when we will get the Fed's updated economic projections. Those events will be followed by a press conference with Chairman Powell at 2:30 PM. It is likely going to be a pretty active afternoon in the financial and mortgage markets, especially if the meeting yields any surprises.
Thursday's monthly report is Leading Economic Indicators (LEI) for February from the Conference Board. This index attempts to measure economic activity over the next three to six months and is considered to be moderately important. However, it likely will not have a significant impact on mortgage rates. Current forecasts are calling for a 0.3% increase, meaning it is predicting that economic activity will likely expand slightly in the coming months. A smaller than forecasted rise, or better yet, a decline would be considered good news for the bond market and mortgage rates.
Overall, Wednesday is likely to be the most active day for rates due to FOMC schedule, but Tuesday may bring noticeable movement also. The calmest day could be Friday with nothing of importance scheduled for release. Despite a relatively small number of economic releases, we should still see plenty of movement in rates this week. Accordingly, keep an eye on the markets if still floating an interest rate and closing in the near future.