This week brings us plenty that may influence mortgage rates. We have six monthly reports for the bond market to digest in addition to two Treasury auctions the early part. The most important reports take place mid-week, so we may see the most movement in mortgage rates those days. There is something of importance set for four of the five days, meaning there is a good chance of seeing mortgage rates move quite a bit this week.
The first event of the week that has the potential to affect mortgage rates is the 10-year Treasury Note auction tomorrow. It will be followed by the 30-year bond sale Tuesday. 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 as it would hint that investors still have an appetite for longer-term securities. However, weak demand in the sales could lead to selling and an increase in mortgage rates late tomorrow and/or Tuesday.
February's Consumer Price Index (CPI) starts the week’s economic calendar early Tuesday morning. It measures inflationary pressures at the very important consumer level of the economy. The overall CPI is expected to show a 0.2% increase as is the more important core data. 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 no change or a decline in the readings.
The Labor Department will post February's Producer Price Index (PPI) early Wednesday morning. 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 could cause the Fed to make more rates hikes this year than previously expected. Therefore, increases larger than the 0.2% that are expected for both readings would be bad news for mortgage rates.
Also early Wednesday morning comes February's Retail Sales data from the Commerce Department. 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 rise in sales of 0.3%. If it reveals a larger increase, the bond market will likely weaken and mortgage rates will move higher as it would indicate a stronger reading of economic growth than many had thought. If it shows a much weaker level of spending, I expect to see bond prices rise and mortgage rates improve Wednesday morning, assuming the PPI doesn't show a significant surprise.
Friday has three releases for the markets to digest, but none of them are considered to be highly important. February's Housing Starts data will start the day at 8:30 AM ET. This report tracks construction starts of new housing and doesn't usually cause much movement in mortgage rates. It is considered one of the least important reports we see each month but is expected to show a decline in new starts, indicating softness in the housing sector. Good news for the bond market and mortgage rates would be a sizable decline in new starts. However, unless we see a large variance from forecasts the data likely will not lead to a noticeable move in mortgage pricing.
Next up is February's Industrial Production report at 9:15 AM ET. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% rise from January's level. A large 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.
The final release of the week is the University of Michigan's Index of Consumer Sentiment for March at 10:00 AM ET. 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 will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates. Bad news for bonds and mortgage rates would be rapidly rising confidence. It is expected to show a reading of 99.0, down from February's final reading of 99.7.
Overall, the most important day of the week is Wednesday with two important reports being posted, but Tuesday could be pretty active also. The calmest day is likely to be Thursday unless something unexpected happens, such as a significant stock rally or sell-off. With so much taking place this week, it would be prudent to keep an eye on the markets and maintain contact with your mortgage professional if still floating an interest rate.