This week has seven economic releases and two Treasury auctions scheduled that are relevant to mortgage rates. Some of the data is considered to be highly important to the financial and mortgage markets. The most important reports come the first half of the week, meaning we should see the most movement in rates the earlier days.
January's Retail Sales data will start this week’s calendar early tomorrow morning. 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 0.1% decline in sales. If it reveals a larger decline, the bond market should react favorably and mortgage rates will move lower as it would indicate softer economic growth. An unexpected increase would be bad news for mortgage rates. This report was delayed due to the shutdown so it is a bit aged at this time. However, December’s sales were much weaker than expected (down 1.2%) and another decline should raise significant concern about consumer’s ability to carry the economy going forward.
February's Consumer Price Index (CPI) is next, coming Tuesday morning at 8:30 AM ET. 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 10-year Treasury Note auction will take place Tuesday while 30-year bonds will be sold Wednesday. 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 show 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 Tuesday and/or Wednesday.
Wednesday has two important reports that are expected to affect mortgage rates. February’s Producer Price Index (PPI) is scheduled for 8:30 AM ET. 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.
January's Durable Goods Orders data will give us insight into the manufacturing sector, also coming early Wednesday morning. It tracks new orders at U.S. factories for items expected to last three or more years, such as electronics, refrigerators and airplanes. Analysts are expecting to see a 0.6% decline in new orders, pointing to manufacturing sector weakness. It is worth noting that this data is known to be quite volatile from month to month, so large swings in the headline reading are common. Good news for mortgage rates would be a sizable decline.
Thursday is the lightest day of the week with just January's New Home Sales data at 10:00 AM ET. This is the least important report of the week. It measures housing sector strength and mortgage credit demand by tracking sales of newly constructed homes, but usually does not have a significant impact on bond trading or mortgage rates unless it shows a significant surprise. Thursday's report is expected to show little change in sales. The smaller the number of sales, the better the news it is for bonds and mortgage rates.
Friday has two reports that we will be watching. February's Industrial Production is the first, at 9:15 AM ET. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Forecasts are calling for a 0.4% rise from January's level. A 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 94.9, up from February's final reading of 93.8.
Overall, there are a few days that may end up being the most active for rates. The best candidate is Wednesday’s with two important releases set and the 30-year Bond auction. Tomorrow may also bring a noticeable move in rates due to the importance of the Retail Sales data. Furthermore, Tuesday is worth consideration because consumer level inflation surprises can move the markets. The calmest day will probably be Thursday unless something unexpected happens. With so much going on this week, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.