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There is no escaping the fact that mortgage rates will rise notably – possibly substantially – in the coming days. This is due to the arrival of two long-awaited economic reports. Each has the power to raise or lower rates on its own. If they both move in the same direction, the change could be huge.
The first major monthly jobs report (official name: The Employment Situation) arrives tomorrow morning. The average forecast sees 180k new payrolls for the month of April compared to 236k in March. Other anecdotes from the labor market are virtually unanimous in their suggestion for a really high number. If it comes in much higher than expected, rates will almost certainly be moving higher.
The second report – the Consumer Price Index (CPI) – next Wednesday is every bit as important. It is the leading indicator for inflation in the US and has been one of the main sources of inspiration for interest rates on the occasions where it has spooked the market.
It is important to understand that there is no way to know how the data will turn out ahead of time compared to median forecasting. It is equally important to understand that those forecasts have already considered everything that can currently be known about the factors that are likely to affect the numbers. This can be confusing when the annual CPI % is only falling because of changes in the composition of the previous 12 months. Will discuss this in detail on Tuesday.
Rates started slightly lower today and continued to fall through the afternoon due to headlines regarding a possible sale of Western Alliance Bank. By the end of the day bonds were back in weak territory (weaker bonds = higher rates) and average lenders returned to levels they were close to yesterday.
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