This week brings us the release of only two monthly economic reports in addition to a couple of Treasury auctions midweek. It starts off light with nothing scheduled tomorrow or Tuesday that are likely to affect rates.
The calendar begins early Wednesday afternoon with the first of two important Treasury auctions set for this week. 10-year Treasury Notes will be sold Wednesday, followed by 30-year Bonds Thursday. These sales will give us an indication of demand for long-term securities, such as mortgage-related bonds. If the sales are met with a strong demand from investors, we should see the bond market move higher during early afternoon trading those days. But a lackluster interest from buyers, particularly international investors, will likely lead to broader bond selling. The selling in bonds would result in upward afternoon revisions to mortgage rates.
January's Consumer Price Index (CPI) will be posted early Thursday morning. This index measures inflationary pressures at the consumer level of the economy. Its results can have a significant impact on the financial markets, especially on long-term securities such as mortgage-related bonds. Therefore, all related data is watched very closely. Inflation is a hot topic and a major concern for the markets currently. The report is expected to show a 0.5% increase in the overall index and a 0.5% rise in the more important core data that excludes volatile food and energy prices. If we see weaker than expected readings, bond prices should rise and mortgage rates will likely fall.
The only other monthly report of the week will be February's preliminary reading to the University of Michigan's Index of Consumer Sentiment late Friday morning. This index tracks consumer willingness to spend and usually has a moderate impact on the financial markets because consumer spending is such a large part of the U.S. economy. It is currently expected to show a 67.5 reading, up from January's final reading of 67.2. That would indicate consumers are slightly more optimistic about their own financial situations than last month, meaning they are more likely to make a large purchase in the near future that fuels economic growth. Good news for rates would be a large decline in this reading.
Overall, Thursday is the most important day of the week for rates due to the CPI, but Wednesday may bring some volatility also.The calmest day may be Tuesday unless something unexpected happens. Despite the lack of a high number of economic releases, there is enough scheduled to make this another fairly active week for the markets. It would be prudent to watch them closely if still floating an interest rate and closing in the near future.