Market Commentary for the Week of April 6th

This week has little in terms of economic reports scheduled that are expected to influence mortgage rates. We do have two Treasury auctions and the minutes from the most recent FOMC meeting that have the potential to affect rates though. Corporate earnings season also kicks off this week, which could be instrumental in driving stock prices significantly higher or lower. Since stock movement often affects bond trading, we will also be watching the earnings releases from some of the bigger names and bellwethers to help gauge bond direction and mortgage rate movement.

There is nothing of importance scheduled for release Monday or Tuesday. However, with the stock markets closed Friday due to the Good Friday holiday, they have not had an opportunity to react to March’s surprise employment numbers. Therefore, we can expect a very active day for stocks Monday and quite possibly bonds. I would not be completely surprised to see bonds extend Friday’s gains as a result.

The first events of the week will come Wednesday afternoon. One is the release of the minutes from the last FOMC meeting. Market participants will be looking at them closely as they give us insight to the Fed’s current thought process and individual Fed member opinions. Any surprises in the 2:00 PM ET release, particularly about inflation, economic conditions or when the first rate hike will take place, could cause afternoon volatility in the markets Wednesday and possible changes in mortgage pricing.

The two Treasury auctions are scheduled for Wednesday and Thursday. There is a 10-year Treasury Note sale Wednesday and a 30-year Bond sale Thursday. We could see some weakness in bonds ahead of the sales as participating firms sell current holdings to prepare for them. This weakness is usually only temporary if the sales are met with a decent demand. The results of the auctions will be posted at 1:00 PM ET each day. If the demand from investors was strong, the bond market could rally during afternoon trading, leading to lower mortgage rates. If the sales were met with a poor demand, the afternoon weakness may cause upward revisions to mortgage pricing Wednesday and/or Thursday afternoon.

Overall, look for the most movement in rates the latter part of the week. Wednesday could be the most active day of the week if the FOMC minutes reveal any surprises. If not, the best bet would be Monday. Tuesday appears to be the lightest and will probably be the calmest day for mortgage rates. Look for the stock markets to also influence bond trading and mortgage rates a good part of the week as traders react to the corporate earnings news. I am expecting it to be an active week for the mortgage market, so please maintain contact with your mortgage professional if still floating an interest rate.