Updated on April 12, 2021 10:02:54 AM EDT
There is nothing of importance taking place this morning, but we do have a 10-year Treasury Note auction today that may affect rates this afternoon. Results will be posted at 1:00 PM ET. If demand from investors was strong, the bond market could rally during early afternoon trading, possibly leading to lower mortgage rates. On the other hand, a lackluster interest in the securities may fuel afternoon weakness and upward revisions to mortgage pricing later today. This process will be repeated tomorrow when 30-year Bonds are sold.
There are six monthly economic reports scheduled for release over the remaining four days of the week. March’s Consumer Price Index (CPI) at 8:30 AM ET tomorrow is the first. This index is one of the more important pieces of data the bond market gets each month. It will give us a measurement of inflationary pressures at the consumer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data. The core data carries more significance to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bonds future fixed interest payments and causes the Fed to be more aggressive with key short-term rate hikes. Weaker than expected readings would be favorable news for the bond market and mortgage rates. Current forecasts are calling for a 0.5% rise in the overall reading and the core data to rise 0.2%.
Also worth noting is that we are heading into corporate earnings season where publicly-traded companies post their quarterly earnings and forward projections. Generally speaking, bad news for stocks is good news for bonds and could lead to lower mortgage rates. Disappointing earnings should drive stocks lower, causing funds to shift into bonds and mortgage rates to move lower. But stronger earnings could fuel bond selling and higher mortgage rates.
Overall, tomorrow or Thursday are the best candidates for most active day for rates due to the importance of the data coming those days. But the truth is, we could see rates become volatile any day, especially when stocks are in the forefront. Bonds have had nice run recently that have pushed yields and mortgage rates lower. Don’t be surprised to see some pressure build before making another leg downward. That is speculation of course, but it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future. This is because risk versus reward of floating, when closing soon, has tilted more towards risky in my opinion.
©Mortgage Commentary 2021