Mortgage Blog

Recomendation: LOCK

This week brings us the release of five economic releases for the bond and mortgage markets to digest along with a 10-year Treasury Note auction. There is relevant economic news scheduled for release each day except tomorrow and Wednesday. Three of the five reports are considered to be of high importance to the markets. This means that we will likely see a noticeable move in rates several days of the week.

The first report is February's Retail Sales data early Tuesday morning. This report is extremely important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, data that is related to spending usually has a big impact on the financial markets. This month's report is expected to show an increase in sales of approximately 0.3%. If we see a smaller than expected increase, the bond market should rise and mortgage rates will likely fall. If it reveals a larger increase, I expect to see bond prices fall and mortgage rates rise Tuesday morning.

The Labor Department will post February's Producer Price Index (PPI) early Thursday morning. This index measures inflationary pressures at the producer level of the economy. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy prices. If the index shows a large increase, inflation concerns may rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Thursday morning. Current forecasts are calling for a 0.4% rise in the overall reading and a 0.2% increase in the core data.

There are three pieces of data scheduled for release Friday. The first is February's Consumer Price Index (CPI), which is similar to Thursday's PPI except this index tracks prices at the more important consumer level of the economy. It will also have two readings for the markets to digest. It is expected to show a 0.3% rise in the overall readings and a 0.2% increase in the core data.

February's Industrial Production report will be posted at 9:15 AM ET. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.3% increase during January. As long as this report does not exceed forecasts by too much it will probably have only a minor influence on the mortgage market Friday.

The last release of the week is not a government-issued report. The University of Michigan's Index of Consumer Sentiment for March is expected to be posted at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. A drop in confidence will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates. If the index rises, indicating that confidence is rising and spending is likely to continue, we may see mortgage rates move higher late Friday morning. It is expected to show a reading of 90.5, down from February's 91.3.

Overall, it will likely be another active week in the mortgage market. Tuesday, Thursday or Friday can all be labeled as the most important day of the week. Any of the three can lead to a significant change to mortgage pricing, but I am thinking Tuesday or Friday will likely brings us the biggest moves. The Treasury auction is scheduled for Tuesday, but its results will not be posted until 1:00 PM ET. If investor demand was high, we may see bonds rally during afternoon trading, however, weak demand could lead to selling an increase to mortgage rates. Generally speaking, this week is definitely a good one to maintain contact with your mortgage professional if an interest rate has not been locked yet.

randy.reed mpspecialists.com