There are six economic reports scheduled for release this week, two of which are considered key releases. We also have a couple of Treasury auctions that may affect rates slightly during afternoon hours two days. The week starts off light with nothing of relevance scheduled for tomorrow morning, but gets much more active as the week progresses.
Activities start tomorrow afternoon with the first of this week's two relatively important Treasury auctions. 5-year Notes will be sold tomorrow and 7-year Notes will go Tuesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly with weak demand from investors, we could see selling in the broader bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors that translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours.
March's Consumer Confidence Index (CCI) will kick off this week's economic calendar late Tuesday morning. The New York-based Conference Board will post this index, giving us an indication of consumers' willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that consumer confidence in their own financial situations are falling, it will indicate that consumers are less apt to make a large purchase in the near future. Analysts are expecting to see a decline for March, bringing the index down to 107.5 from February's 110.5. Good news for rates would be a smaller than predicted number.
The ADP Employment report is set for early Wednesday morning. While it does draw attention by tracking new private-sector payrolls, it is my opinion that it is overrated and is not a true reflection of the broader employment picture. It also is not accurate in predicting results of the monthly government report that follows a couple days later. Still, because it has the potential to influence rates, we are watching it. Market participants are expecting it to show that approximately 440,000 new private-sector payrolls were added to the economy last month. The lower the number of jobs, the better the news it is for mortgage rates.
The second revision to the 4th Quarter GDP will be released at 8:30 AM ET Wednesday. The Gross Domestic Product is the total of all goods and services produced in the U.S. and is the benchmark measurement of economic activity. It is expected to show that the economy grew at an annual pace of 7.1% last quarter, up slightly from the previous estimate of 7.0% that was released last month. Analysts are now more concerned with next month's preliminary reading of the 1st quarter than data from three to six months ago. Accordingly, unless we see a significant revision, this report probably will have little impact on Wednesday's mortgage rates.
February’s Personal Income and Outlays report is set for release Thursday morning. This data helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending-related information has on the financial markets. If a consumers' income is rising, they are more likely to make additional purchases in the near future. Therefore, weaker than expected readings would be good news for bonds and mortgage rates. Also in this release is an important inflation index (PCE) that the Fed uses to gauge inflation. Forecasts are currently calling for a 0.5% rise in February's income and the same in spending. Forecasts for the core PCE index are a 0.4% increase. The weaker the readings, the better the news it will be for mortgage rates.
Friday has both of this week’s major economic releases. First is the extremely important Employment report for March that will reveal the U.S. unemployment rate, the number of jobs added or lost during the month and change in average earnings. This is arguably the single most important economic report we get each month. Forecasts show that the unemployment rate fell to 3.7% while payrolls rose by 470,000 last month. Average earnings are predicted to show a 0.4% increase. Weak readings are favorable for mortgage rates, so the lower the payroll number and earnings, along with a higher unemployment rate, the better the news it is.
The week’s final release will be the Institute for Supply Management's (ISM) manufacturing index for March at 10:00 AM ET Friday. This index gives us an extremely important measurement of manufacturer sentiment by surveying trade executives about business conditions. It is one of the freshest pieces of economic data each month. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened, signaling growth in the manufacturing sector. This month's report is expected to show a reading of 58.3, down from February's 58.6.
Overall, there is no reason to believe mortgage rates will remain calm this week. The financial and mortgage markets have been so active recently, even when there was a lack of important data being released to drive them. The current geopolitical crisis in Ukraine appears to have lost its heavy influence on day to day trading, leaving market participants to turn their attention back to inflation issues. With focus back on inflation, related economic data should play a bigger role in market movement than it has the past few weeks. We have several reports scheduled this week that have the potential to heavily influence the markets under normal circumstances, let alone during volatility times. In other words, expect to see another round of noticeable changes to mortgage pricing, possibly intraday moves also. After the major upward trend in bond yields and mortgage rates, it is quite possible that we could see some relief this week, assuming the data cooperates.