This week brings us the release of only three pieces of monthly economic data in addition to the minutes from last month's FOMC meeting and two Treasury auctions. Despite the small number of economic reports, we still should have a relatively active week for mortgage rates. It starts off slow with nothing of importance taking place tomorrow.
March's Producer Price Index (PPI) will kick off the week’s activities early Tuesday morning. It will give us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond's future fixed interest payments and causes the Fed to be more aggressive with key short-term rate hikes. Weaker than expected readings would be favorable news for the bond market and mortgage rates. Current forecasts are calling for a 0.2% rise in both readings.
Next up is the Consumer Price Index (CPI) at 8:30 AM ET Wednesday. This index is one of the more important pieces of data the bond market gets each month. It is the sister release to Tuesday's PPI but measures inflationary pressures at the consumer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. As with the PPI, there are two readings in the index that traders watch- the overall and the core data. Analysts are expecting to see a 0.1% increase in the overall readings and a 0.2% rise in the core reading.
This week also has two Treasury auctions that have a decent chance of affecting mortgage rates. There is a 10-year Treasury Note sale Wednesday and a 30-year Bond sale Thursday. We could see some weakness in bonds ahead of the sales as participating firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing Wednesday and/or Thursday.
Wednesday afternoon also has the minutes from the last FOMC meeting. Market participants will be looking at them closely as they give us insight to the Fed's current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release, particularly about inflation, economic conditions or when the next rate hike will take place, could cause afternoon volatility in the markets Wednesday and possible changes in mortgage pricing.
The week closes with the University of Michigan's Index of Consumer Sentiment late Friday morning. This index will give us an indication of consumer confidence, which hints at consumers' willingness to spend. If confidence is rising, consumers are more apt to make large purchases. But, if they are growing more concerned of their personal financial or employment situations, they probably will delay making that purchase. This influences future consumer spending data and can have a moderate impact on the financial markets. Good news would be a sizable decline from March's 101.4 reading. Current forecasts are calling for a reading of approximately 100.8.
Overall, Wednesday is the best candidate for most active day for mortgage rates with the CPI, 10-year Note auction and FOMC minutes all set. The least active day will probably be Thursday unless something unexpected happens.