Updated on March 27, 2020 10:16:52 AM EDT
Yesterday’s 7-year Treasury Note auction went even better than Wednesday’s 5-year Note sale. Investor demand was strong enough to see a positive move in bonds after results were posted at 1:00 PM ET. The auction itself wasn’t to source of yesterday’s late strength but did contribute to the afternoon gains in bonds.
February’s Personal Income and Outlays report was posted at 8:30 AM ET this morning, revealing a 0.6% rise in the income reading while spending rose 0.2%. The rise in income exceeded expectations and the spending increase pegged forecasts. The report indicates consumers had more money to spend than thought but didn’t spend more. Results of the report are neutral-slightly negative for mortgage rates. However, since it covered February, we have seen no reaction to the news.
The second report of the day was the revised University of Michigan Index of Consumer Sentiment for March. It came in at 89.1, down greatly from the preliminary reading of 95.9 just two weeks ago. This was widely expected due to concerns about the coronavirus and its impact on future income. The large decline is good news because it means consumers are less likely to spend since they are worried about their jobs during this crisis. But the reading fell within the large range of forecasts. Since it did not come as a surprise, we are seeing little reaction to the release.
Next week brings us the release of a good number of economic reports that traditionally influence mortgage rates, including a couple of extremely important releases. More importantly, those highly relevant releases will cover March, giving us insight into how bad the early stages of the coronavirus shutdown were affecting the economy. Over the past couple of weeks, the markets have ignored the monthly and quarterly reports because they covered periods that predated the full-blown virus reaction in the U.S. The upcoming reports will start to reflect how bad the economy is being hit during the crisis.
The most important releases will come mid and late week and there is nothing of relevance set for Monday. We can also expect to see the same influences carry into next week (stock volatility, Fed buying of Treasuries and mortgage bonds, lender pipeline control, etc) that have heavily impacted rates recently. We are set up for the same scenario as recent weeks, only with economic data also coming into play. Look for details on next week’s calendar in Sunday evening’s weekly preview.
©Mortgage Commentary 2020