Following several weeks with many economic reports, Fed appearances and other events to drive the markets and mortgage rates, we get somewhat of a reprieve this week. There is just one monthly and one weekly report that is worth watching, along with a couple of Treasury auctions. This light of a calendar should help keep mortgage rates relatively calm this week, at least compared to recent weeks.
The two relevant Treasury auctions will take place Wednesday and Thursday. 10-year Treasury Notes will be sold Wednesday while 30-year Bonds will go Thursday. These sales don’t directly impact mortgage rates but can affect the broader bond market that trickles into mortgage bonds. If investor demand was high for these securities, we may see bonds rally during afternoon trading midweek. However, weak interest in these sales could lead to bond selling and a possible increase in mortgage rates. Results of both auctions will be posted at 1:00 PM ET on the sale days, meaning if there is a reaction, it will come during early afternoon hours.
The weekly report will be last week’s unemployment figures early Thursday morning. They are expected to show that 1.34 million new claims for unemployment benefits were filed last week, down from the previous week’s 1.427 million filings. A high number of new claims signals a weak employment sector. Therefore, the larger the number, the better the news it is for mortgage rates.
May's Producer Price Index (PPI) is the monthly report, scheduled for 8:30 AM ET Friday. It measures inflationary pressures at the producer level of the economy. There are two readings to this index that analysts pay attention to. They are the overall reading and the more important core data that excludes volatile food and energy costs. A large increase would fuel concerns about inflation rising at the manufacturing level. This would not be good news for bond prices or mortgage rates since inflation erodes the value of a bond's future fixed interest payments. Rapidly rising inflation causes investors to sell bonds, driving bond prices lower, pushing their yields upward and bringing mortgage rates higher. Analysts are expecting to see a 0.4% increase in the overall reading and 0.1% rise in the core data. Good news for mortgage shoppers would be weaker readings.
Overall, no day stands out as critical for rates this week. Friday is the best candidate for most active day due to the release of the PPI, but it carries the same significance right now as the weekly unemployment update Thursday. The calmest day may end up being Tuesday unless something unexpected happens. While there is little scheduled this week that is expected to influence rates, it still would be prudent to watch the markets if still floating an interest rate as the markets can get active without notice.