Updated on March 8, 2021 10:07:11 AM EST
There is no relevant economic data or other influential events scheduled for today or tomorrow. The rest of the week has only three reports that we will be watching, in addition to a couple of Treasury auctions. All of the data and auctions will take place the mid and latter days, meaning we should see the most movement in rates those days.
Inflation is the theme of the week with two indexes scheduled that track inflationary pressures at the consumer and manufacturing levels of the economy. Since the pandemic started, inflation hasn’t been much of a concern due to the economic shutdown. Now that restrictions have been lifted in many states and a new round of stimulus looks to be coming soon, the topic is in the forefront. Higher inflation levels make a bond’s future fixed interest payments less valuable today, causing traders to sell them at a discount to offset that loss. That translates into higher yields and mortgage rates. This is why bonds are sensitive to inflation-related data.
The Treasury auctions taking place will give us an indication of demand for long-term securities that can also relate to mortgage bonds. Strong demand from investors shows confidence in longer-term securities and should help boost mortgage bonds that also fall into that category. The results of these sales come at 1:00 PM on auction days, making them afternoon events Wednesday and Thursday.
Overall, the inflation reports will draw plenty of attention this week. Wednesday looks to be the most important day of the week due to the CPI release and the 10-year Note auction while tomorrow may be the calmest day for rates unless something unexpected happens. However, as we saw last week, the markets can get active at any time without notice. Therefore, keep a close eye on them if still floating an interest rate and closing in the near future.
©Mortgage Commentary 2021