SUNDAY,  MAY 7th, 2023

This week brings us the release of only three monthly economic reports for the markets to digest in addition to a couple of Treasury auctions that we will be watching. Two of this week’s reports are considered highly important to the financial and mortgage markets. The week starts off light with nothing of importance scheduled for tomorrow or Tuesday. Look for stock gains or losses and debt ceiling talk to help dictate bond and mortgage pricing direction the first couple of days.

Activities begin early Wednesday when April’s Consumer Price Index (CPI) is posted at 8:30 AM ET. This highly important report measures inflationary pressures at the consumer level of the economy. These results are watched closely because rising inflation makes long-term securities, such as mortgage-related bonds, less attractive to investors. With inflation such a hot topic in the markets, this type of report will likely have a heavy impact on rates. The overall reading is expected to rise 0.4% while the more important core data that excludes volatile food and energy costs, is predicted to rise 0.3%. Favorable news for bonds and mortgage rates will be smaller increases.

Besides this week’s economic reports, there will also be two Treasury auctions taking place that have the potential to influence mortgage rates. 10-year Notes will be auctioned Wednesday while 30-year Bonds will be sold Thursday. Results of each sale will be posted at 1:00 PM ET on the respective auction day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sales, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing during afternoon trading.

Next up is April’s Producer Price Index (PPI), scheduled for release at 8:30 AM ET Thursday. This is the sister release to the CPI but tracks inflationary pressures at the producer level of the economy. As with the CPI, there are two readings that the markets usually look at. Forecasts are calling for a 0.3% increase in the overall reading and a 0.2% rise in the core data.

Closing the week Friday is May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident in their own financial situations, they are more apt to make large purchases in the near future. It usually has a moderate impact on the financial markets though, because it is not exactly factual data. Friday’s update is expected to show a reading of 62.9, down from April’s final reading of 63.5, indicating consumers are a little less confident than last month. If it shows a larger decline in confidence, bond prices could rise and mortgage rates may move slightly lower because waning confidence means consumers are likely to spend less, restricting economic growth.

Overall, Wednesday is the best candidate for most active day for rates due to the importance of the CPI and the afternoon auction results. Tuesday may be the calmest day unless something unexpected happens. We should see the most movement in rates the middle days of the week.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now…

.