Overview: It was a relatively quiet period for mortgage markets over the past week. The reaction to economic data was minor, and rates ended the week a little higher.
The reduced economic activity resulting from the pandemic caused a significant decline in inflation last year, which was one of the factors responsible for record-low mortgage rates. Now that the vaccine rollout is moving forward and the economy is reopening, investors are concerned that inflation may be heading higher, which has been a major reason for the increase in bond yields this year. Still, there are few signs in the current data that a rise in inflation has begun. In February, the core Personal Consumption Expenditures (PCE) Price Index was just 1.4% higher than a year ago, down from an annual rate of increase of 1.5% last month, and well below the Federal Reserve’s stated target level of 2%.
Meanwhile, consumer confidence in the U.S. has increased to the highest level since the start of the pandemic. The Consumer Confidence Index from the Conference Board jumped from 90.4 in February to 109.7 in March, far above the consensus forecast and the best reading in a year. The rollout of the vaccine, the reopening of the economy, and the distribution of stimulus checks have all helped make consumers more optimistic about future economic conditions.
The total number of new claims for unemployment insurance this week was 684,000, the lowest level in over a year. This was far below the historically shocking figures seen during the early months of the pandemic, but still well above the readings of around 250,000 which were typical during 2019. Economists forecast that there will be large job gains in coming months and that jobless claims will continue to decline.
Core CPE (annual % change)
Week Ahead
April 1 — Institute for Supply Management (ISM) Manufacturing Index
April 2 — Employment Report
April 2 — Mortgage markets close at noon EDT for Good Friday