This week’s update is from one of the economic analysts I follow, Larry Baer. He mostly deals with the gyrations of the bond market and its effect on mortgage rates. He dings me by text with updates starting at 5:30 am daily on days when bond market is trading. What many people don’t realize is that the mortgage rates change with the changes in the price of bonds, and bonds change second by second just like the stock market does. So sometimes if you lock in your rate in the a.m. ahead of market making news, your rate can be lower than if you lock in in the afternoon on such a day.

Here is Larry (by permission)

Looking ahead to next week — the Federal Open Market Committee’s next regularly scheduled monetary policy strategy session on Tuesday, March 15th and Wednesday, March 16th will take center stage. 

Tuesday’s release of the February’s Producer Price Index and Retail Sales figures combined with the Wednesday’s February reading from the Consumer Price Index, Housing Starts and Building Permits, and the Industrial Production & Capacity Utilization stats will likely prove to be little more than “warm-up” acts for the post-meeting statement from the Fed due at 2:00 p.m. ET Wednesday afternoon.

Core inflation at both the producer and consumer levels is expected to be well behaved and the ex. transportation component of the Retail Sales report is projected to be noticeably softer than January levels. Housing Starts and Building Permits should show modest weather related improvement while the Industrial Production and Capacity Utilization stats are anticipated to slide fractionally lower.

There are a number of economists, analysts, and other market participants expressing concern the Fed will choose to view last Friday’s outsized 242,000 February job gain as ample justification for another 25 basis-point hike in the central bank’s benchmark short-term interest rates.

While a March rate hike is certainly possible, there is little in terms of recent macro-economic data, outside of last week’s headline employment gain, to which the Fed could reasonably refer to as a trigger-point.

Based on the Chicago Mercantile Exchange 30-Day Fed Fund futures prices – market participants think the chances the members of the Federal Open Market Committee will vote to raise short-term interest rates this time around is near 0%.  

Assuming the Fed does indeed pass on the opportunity to bump short-term rates higher this time around – look for stock prices to begin to move lower to the potential direct benefit of steady to perhaps fractionally lower mortgage interest rates. 

The Market is Always Right! … You and I are Some of the Time

Larry Baer

Me: rates this week did move up on the better than expected weekly jobs numbers and the CPI.