Market Commentary

Updated on March 13, 2025 10:13:56 AM EDT

Yesterday’s 10-year Treasury Note auction was mostly uneventful. The 1:00 PM ET result announcement indicated investor demand was slightly better than average compared to other recent sales, but not enough for it to be labeled strong. We saw bonds improve slightly after results were posted. However, it was not enough of a reaction to affect mortgage rates. We have the follow up sale today when 30-year Bonds are auctioned. Results of today’s sale will also be available at 1:00 PM. If investor interest in the securities is considered strong, we should see bonds improve, possibly leading to a slight improvement in mortgage pricing.

February’s Producer Price Index (PPI) was released at 8:30 AM ET this morning. It showed that inflationary pressures at the wholesale level of the economy were softer than thought, following suit of yesterday’s consumer version. The overall monthly PPI was unchanged from January while the more important core reading that excludes volatile food and energy costs rose only 0.2%. Forecasts had both readings rising 0.3%. On an annual basis, they rose 3.2% and 3.4% respectively. Both annual readings were a decline from January’s pace and weaker than predictions.

The reason we are seeing negative action in bonds despite favorable inflation news yesterday and today is becoming a little clearer. While the inflation data has been favorable, it is still well above the Fed’s preferred annual rate of 2.0%. Sticky is a word that is being used often to describe its direction. This week’s data covers the period before the costs of recently announced tariffs are included. With inflation moving lower quite slowly and a potentially significant impact coming on some goods due to tariffs, traders are concerned what future reports are going to show. If inflation was dropping quickly when the tariffs go into effect, it likely wouldn’t be as much of a concern. Until the markets can see how much of an impact these tariffs are going to have on costs, they are going be cautious. This is why we have not seen a positive reaction to the CPI and PPI data.

Also early this morning was the release of last week’s unemployment figures that showed 220,000 new claims for jobless benefits were made. This was lower than the 226,000 that was expected and a small decline from the previous week’s revised 222,000 initial filings. The lower number is a sign of strength in the employment sector that makes the data bad news for bonds and mortgage rates.

Tomorrow has a single relevant economic report that we will be watching. The preliminary University of Michigans Index of Consumer Sentiment for March will be posted at 10:00 AM ET. This index gives us a measurement of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, then they are more apt to make large purchases in the near future. Recent related data has pointed to waning confidence, helping to boost bond prices and lower mortgage rates. Another big drop in confidence will probably hurt the stock markets and lead to mortgage rates moving lower tomorrow. The lower the number, the better the news for mortgage pricing.

We also will be following news from Washington DC regarding the funding issue and possible government shutdown tomorrow evening. It is unclear what will happen with the Senate vote, which needs support from some Democrats to pass. As previously mentioned, these issues get resolved before the deadline more often than not. That said, anything is possible in these current political times. The issue shouldn’t have a noticeable impact on mortgage rates though, at least not over the next few days.