This week brings us the release of six economic reports that have the potential to move mortgage rates with two of them considered to be highly important to the markets. The first is February's Personal Income & Outlays report early Monday 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. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.1% increase in income and a 0.1% rise in spending. Declines in these readings would be good news for bonds and mortgage shoppers.
Tuesday also has only one report worth watching. This will come from the New York-based Conference Board at 10:00 AM ET when they post their Consumer Confidence Index (CCI) for March. This index gives 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 confidence in their own financial situations is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show a reading of 94.5 up from February's 92.2 reading. The lower the reading, the better the news it is for bonds and mortgage rates.
The ADP Employment report is set for release early Wednesday morning, which has the potential to cause some movement in the markets if it shows much stronger or weaker numbers. This report tracks changes in private-sector jobs of ADP's clients that use them for payroll processing. While it does draw attention, 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 usually follows a couple days later. Still, because we could see at least a moderate reaction to the results, we will be watching it. Analysts are expecting it to show that 196,000 new payrolls were added. The lower the number of jobs, the better the news it is for mortgage rates.
The biggest news of the week will come early Friday morning when the Labor Department posts March's Employment report, revealing the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 4.9% and that approximately 200,000 payrolls were added to the economy during the month while earnings rose 0.3%. A higher unemployment rate and a much smaller than expected payroll number would be good news for bonds and could likely push mortgage rates lower Friday morning because it would indicate weaker than thought conditions in the employment sector of the economy.
Friday's second report comes from the University of Michigan just before 10:00 AM ET Friday. Their revised March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers' willingness to spend. Rising confidence is considered bad news for the bond market and mortgage pricing because it usually means consumers are more willing to spend. Friday's report is expected to show a reading of 90.5, up from the preliminary reading of 90.0. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.
The final report of the week is the other highly important one and comes at 10:00 AM ET. That is when the Institute for Supply Management (ISM) will release their manufacturing index. This index gives us an important measurement of manufacturer sentiment by surveying manufacturing executives. It is the first piece of data that we see each month that covers the preceding month. In other words, it is the freshest 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. This month's report is expected to show a reading of 50.6, which would be an increase from February's reading of 49.5. This means that analysts think business sentiment rose from last month's level. That would be relatively bad news for the bond market and mortgage rates because rising confidence means a stronger manufacturing sector. The higher the reading, the worse news it is for bonds and mortgage rates.
In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Tuesday and 7-year Notes on Wednesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
Overall, Friday is clearly the biggest day of the week due to the significance of the Employment report and ISM index. It surely will be an interesting day to cap off the week.