Daily Rate Lock Advisory

Indexes Affecting Rate Lock

Medium

Neutral

Treasury Auctions (5,7,10,20,30 year)

Yesterday’s 20-year Treasury Bond auction went pretty well considering the current inflation environment. The benchmarks we use to gauge investor interest in the securities pointed to a fairly strong demand compared to other recent sales. While decent auctions of long-term debt generally is considered good news for bonds and mortgage rates, we did not see much of a reaction to the 1:00 PM ET results announcement. Apparently, investors had already turned their attention to today’s inflation data and FOMC meeting adjournment, preventing a positive impact on mortgage pricing late yesterday.

High

Negative

Producer Price Index (PPI)

Today’s heavy calendar opened with the release of February’s Producer Price Index (PPI), that revealed inflation was much stronger than thought at the wholesale level of the economy. Keep in mind that this was well before the Iran war started, so we haven’t seen the impact of it in our traditional inflation reports yet. The overall PPI jumped 0.7% last month with the core data rising 0.5%. Both readings were expected to rise only 0.3%. Stronger monthly readings pushed the annual numbers higher than predicted also. On an annual basis, the overall PPI rose to 3.4% when it was expected to hold at January’s 2.9% and the more important core data going from 3.5% in January to 3.9% last month. These numbers clearly indicate wholesale inflation is moving away from the Fed’s goals (2.0% annually) instead of towards it. Because rising inflation makes a Fed rate cut in the near future much less likely and also causes bonds to be less appealing to investors, today’s report was very bad news for mortgage rates.

Medium

Neutral

Factory Orders

January's Factory Orders report was this morning’s second economic report. The 10:00 AM ET release showed a 0.1% increase in new orders for both durable and non-durable goods. This matched forecasts and is a sign the manufacturing sector was flat as the new year began. We did not see bonds react to the data.

High

Unknown

Federal Open Market Committee (FOMC) Statement

This afternoon’s Fed events will begin at 2:00 PM ET when the FOMC meeting adjourns and their post-meeting statement is released. It is widely expected that they will leave key short-term interest rates unchanged at this meeting. That was the case before the Iran war started and oil prices jumped, so there is no chance whatsoever that they will make a rate cut at this meeting. What traders are most interested about is how the Iran war and the related jump in oil costs have affected their outlook for inflation and future rate cuts, or a possibly rate hike. There was some discussion before the war started that they may need to raise key rates before they lower them again. We may get some answers to those type of questions this afternoon.

High

Unknown

Misc Fed

Along with the adjournment and post-meeting announcement, we will also get the Fed's revised economic projections at 2:00 PM ET. These economic predictions include what is known as the dot plot that tells us each member's individual predictions for key rates. Analysts use them as the Fed's official projections for rates. The press conference with Chairman Powell will start at 2:30 PM. It is likely going to be an active afternoon in the financial and mortgage markets, especially if their rate predictions alter the current plan of two rate cuts this year. Any comments or other information that indicates the Fed’s plans have changed would be bad news for bonds and mortgage rates.

Medium

Unknown

Weekly Unemployment Claims (every Thursday)

Tomorrow has two minor pieces of data to close out this week’s economic releases. They will be addressed in this afternoon’s update that will be posted shortly after the markets have an opportunity to react to today’s FOMC events.

Rate Lock Advisory

Mortgage Rate Trend

Indexes Affecting Rate Lock

Treasury Auctions (5,7,10,20,30 year)

Producer Price Index (PPI)

Factory Orders

Federal Open Market Committee (FOMC) Statement

Misc Fed

Weekly Unemployment Claims (every Thursday)

Float / Lock Recommendation