Mortgage bond prices finished the week higher which put downward pressure on rates. Rates were flat Monday morning despite factory orders weakness. Orders fell 0.8% vs the expected 0.7% decline. The Fed continued their massive MBS billion-dollar daily purchases. Most of the improvements came Monday afternoon and Tuesday morning amid no data. The trade deficit was $71.1B vs 70.5B. The Fed minutes highlighted improved economic output and noted “the date of the first increase in the target range for the federal funds rate implied by a straight read of market pricing moved notably earlier to the first quarter of 2023, and the implied target rate at the end of 2023 rose around 50 basis points.” Weekly jobless claims were higher than expected at 744K vs 690K. PPI rose 1% vs the expected 0.5% increase. The core rose 0.7% vs 0.2%. Mortgage interest rates finished the week better by approximately 1/2 to 5/8 of a discount point.

Looking Ahead
Economic IndicatorRelease Date & TimeConsensus EstimateAnalysis
3Y and 10Y Treasury Note AuctionsMonday, April 12,
1:15 pm, et
NoneImportant. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Price IndexTuesday, April 13,
8:30 am, et
Up 0.5%,
Core up 0.2%
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Retail SalesThursday, April 15,
8:30 am, et
Up 3.1%Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
Weekly Jobless ClaimsThursday, April 15,
8:30 am, et
685KImportant. An indication of employment. Higher claims may result in lower rates.
Philadelphia Fed SurveyThursday, April 15,
8:30 am, et
42.5Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
Industrial ProductionThursday, April 15,
9:15 am, et
Up 1.6%Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity UtilizationThursday, April 15,
9:15 am, et
75.4%Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
NAHB Housing IndexThursday, April 15,
10:00 am, et
84Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates.
U of Michigan Consumer SentimentFriday, April 16,
10:00 am, et
88.6Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Fed Projections

The Federal Reserve has eight scheduled meetings this year with the next ending April 28th. No rate adjustments are expected at this meeting, but we should get some revised forward guidance. The last report from the Fed made many short- and long-term projections about the U.S. economy. Member projections for Real GDP in 2021 range between 5.0 to 7.3. Those figures for 2022 range between 2.5 and 4.4 while 2023’s figures are 1.7 and 2.6. Unemployment ranges from 4 to 5.5 in 2021, 3.2 to 4.2 in 2022, 3.0 to 4.0 in 2023, and 3.5 to 4.5 for the “longer term.” Core PCE inflation, the Fed’s preferred inflation gauge, ranges from 1.9 to 2.5 in 2021, 3.2 to 4.2 in 2022, and 3.0 to 4.0 in 2023. The good news is the Fed expects rates to remain low overall this year. However, the expectations are for higher rates as we go out in time.