This holiday-shortened week brings us the release of only three-monthly economic releases in addition to a couple of potentially influential Treasury auctions and the minutes from last month’s FOMC meeting. The week starts off slow with nothing of relevance scheduled for tomorrow, Tuesday or Wednesday morning.
This week’s activities start Wednesday afternoon with the first of 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 from investors. 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, possibly leading to lower mortgage rates. If the sales were met with a poor demand, afternoon weakness may cause upward revisions to mortgage pricing Wednesday and/or Thursday.
Wednesday afternoon also has the minutes from the Match 15th FOMC meeting, which was unscheduled. 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 about how bad the economy will get during this pandemic. Any surprises in the 2:00 PM ET release could cause afternoon volatility in the markets Wednesday and possible changes in mortgage pricing.
March's Producer Price Index (PPI) will be posted early Thursday morning. It measures inflationary pressures at the producer level of the economy. If inflation is rapidly rising, bonds become less appealing to investors, leading to bond selling and higher mortgage rates. However, inflation isn’t a concern in the current economic situation. Accordingly, unless it shows a huge surprise it likely will not have a noticeable influence on mortgage rates.
Weekly unemployment figures will also be released early Thursday morning. Up until the past three weeks, this release drew little attention because it is only a weekly snapshot. That changed last month when it became the best and freshest indicator of how badly the coronavirus reaction was affecting the employment sector. Last week’s update showed that 6.6 million new claims for unemployment benefits were filed the previous week. Look for another big number, but forecasts range from 3 million to 8 million new filings. A high number of new claims is good news for bonds and mortgage pricing.
Also scheduled for Thursday morning is the preliminary reading for April of the University of Michigan's Index of Consumer Sentiment. This index will give us an indication of consumer confidence that indicates 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. The coronavirus and the current economic turmoil should weigh heavily on consumer sentiment, leading to a large decline. Forecasts are wide-ranging, but most are calling for a large decline from March’s 89.1. The lower the reading, the better the news it is for mortgage pricing.
The bond market will close early Thursday ahead of the Good Friday holiday and remain closed until Monday morning. The stock markets will be open a full day Thursday but will also be closed Friday. Holiday closings sometimes lead to pressure in bonds as traders look to protect themselves from potential market-moving news or events over the long weekend.
Despite the holiday, it appears we will still get some important economic data early Friday morning when March’s Consumer Price Index (CPI) will be released. This index is traditionally one of the more important pieces of data the bond market gets each month since it gives us a measurement of inflationary pressures at the consumer level of the economy. It is also the sister release to the Producer Price Index. Weaker than expected readings would be favorable news for the bond market and mortgage rates theoretically. But as with the PPI, inflation is not of much concern in the markets at the moment, meaning this release will not likely impact rates.
Overall, there is no point is labeling any day as most or least important based on economic releases. While current reports are drawing more attention in the markets than last month’s releases did, they still are not a driving force nor are they directly affecting mortgage rates. None of this week’s reports are likely to be market movers either. We should expect another active week for the markets and mortgage rates, so proceed cautiously if still floating an interest rate and closing in the near future.