Market Commentary

Updated on March 28, 2025 10:12:24 AM EDT

Yesterday's 7-year Treasury Note auction did not go very well. The benchmarks we use to gauge investor demand showed an interest that can be best labeled as below-average to other recent sales. We did see bonds have a slight negative reaction to the 1:00 PM ET results announcement, but it was not enough of a move for most lenders to issue an intraday increase to mortgage pricing and was short-lived. They managed to recover that loss before closing to prevent a negative impact on mortgage rates.

This morning's major news came in February's Personal Income and Outlays report, particularly the inflation readings within the data. February's Personal Consumption Expenditures (PCE) index rose 0.3%, matching forecasts. The more important core reading rose 0.4% when analysts were expecting to see a 0.3% increase. The actual reading rose just over 0.35%, causing it to round up to 0.4% for headlines. This has helped justify bonds mostly ignoring the inflation data, especially since the year-over-year readings didn't yield any surprises.

The other portion of today's first report gave us contradicting readings. Personal income rose 0.8%, exceeding predictions of 0.4%. This is unfavorable for bonds and mortgage rates because it means consumers had more money to spend. However, that additional income did not translate into spending. The outlays reading (spending) was unchanged from January's level, falling well short of the 0.5% that was expected. As another sign of trouble with consumer spending numbers, we can label this part of the report good news for rates.

Closing out this week's calendar was the revised Index of Consumer Sentiment from the University of Michigan at 10:00 AM ET. They announced a reading of 57.0 that was a downward change from the preliminary estimate of 57.9 two weeks ago and the lowest number since November 2022. The lower reading means surveyed consumers did not feel as good about their own financial situations as previously thought. Waning confidence usually translates into softer consumer spending that makes up over two-thirds of the U.S. economy. Accordingly, we can easily label this report as favorable for mortgage rates.

Next week brings us plenty that may influence the financial and mortgage markets. The economic releases start Tuesday and include the typical new month reports, such as the highly important ISM manufacturing index (Tuesday) and governmental Employment report (Friday). Monday is the only day of the week without relevant data set for release. In addition to the data, there are also another batch of Fed-member speaking engagements scheduled. There are a few that have topics related to economic growth and/or monetary policy that will draw plenty of attention. One of them is with Fed Chairman Powell. Look for details on all of next week's activities in Sunday evening's weekly preview.

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