This week brings us the release of five reports that are considered relevant to mortgage rates but some of the data is considered to be very important and one is arguably the single most important data we see each month.We also have two Treasury auctions that have the potential to swing bond trading enough to change mortgage rates. There are events that are relevant to mortgage rates, or at least have the potential to be, each day of the week, so we can expect to see a fair amount of volatility in the markets and possibly mortgage rates the next few days.
The first is February’s Personal Income & Outlays report early this morning. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending- related information has on the financial markets.
If a consumer’s income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.5% rise in spending. Smaller than expected increases would be ideal for mortgage shoppers.
March’s Consumer Confidence Index (CCI) will be posted late Tuesday morning. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up two-thirds of our economy. If this report shows that confidence is falling, it would indicate that consumers are more apt to delay making large purchases. If the report reveals that confidence looks to be growing, we may see bond traders sell, pushing mortgage rates higher Tuesday morning. It is expected to show a decline from February’s 70.4 reading to 65.0 for March.
The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, giving us the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 8.9% and that approximately 185,000 payrolls were added during the month. A higher unemployment rate and a smaller than expected payroll number would be good news for bonds and would likely push mortgage rates lower Friday morning because it would indicate weakness in the employment sector of the economy.
The Institute for Supply Management (ISM) will release their manufacturing index late Friday morning. This index gives us an important measurement of manufacturer sentiment by surveying trade executives and is one of the more important of this week’s data. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened.
This month’s report is expected to show a reading of 61.2, which would be a small decline from February’s reading of 61.4. This means that analysts think business sentiment remained fairly close to last month’s level. That would be neutral news for the bond market and mortgage rates. A noticeable decline would be favorable for rates while an increase would be negative.
In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Tuesday and 7-year Notes on Wednesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
Overall, I expect to see the most movement in rates either Tuesday or Friday. Friday is the most important day of the week with the employment numbers and ISM index being released, but we will likely see a fair amount of movement in rates Tuesday also. I am expecting tomorrow or Wednesday to be the calmest day of the week, but we should still see some changes to rates those days. In general, it will probably be a pretty active week for mortgage pricing. Accordingly, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.
