A thin economic calendar had bonds marching to the beat of the stock market, which posted small gains for the week (Dow up .3%, NASDAQ up .8%) The notion that inflation may remain elevated and tough to contain and that an end to the Fed easing cycle may be in sight caused mortgage rates to lose ground most of the week. The 30 year fixed rate conforming benchmark increased by .125%-.25%.
A shortgage of data will not be a problem this week, as the economic calendar is PACKED with high-impact reports, with the Federal Open Market Committee announcement smack in the middle of it. This will give the markets plenty of information to assimilate and could make for a volatile week. Mortgage bonds have been fairly range bound and creeping lower, causing a net-rise in mortgage rates over the past 5 weeks, so this week will give market participants a substantial chance to re-calibrate and set direction for prices as we march into spring proper.
The Fed (meets Tue, Wed) is expected to cut the Federal Funds and discount rate by .25%. More important than the cut – remember mortgage rates often rise after a Fed cut – market participants will scrtunize the statement released on Wednesday for any hints that the Fed may be near the end of it’s easing binge. If there are any strong signals that the Fed is done easing, mortgage rates could rise significantly.
Other key events on this week’s calendar are outlined in the table below, but the Core PCE (a measure of inflation) and the Jobs Report on Friday stand out to us as the two most important non-Fed data points to watch. A weak job report could help mortgage rates improve, while a "hot" read on inflation could push rates higher.