Yesterday's 30-year Treasury Bond auction was not overly strong or weak, just as Wednesday's sale was. The benchmarks we use to gauge investor demand showed an average interest in the securities compared to other recent auctions. Bonds did improve during afternoon trading, but it doesn't appear that the auction was the cause. They started to move shortly before the results were announced at 1:00 PM ET and continued to improve after. This led to many lenders issuing an intraday downward revision to mortgage pricing before the end of the day.
March's Index of Consumer Sentiment from the University of Michigan was this morning's sole relevant economic release. It came in surprisingly low, indicating surveyed consumers felt much better about their own financial situations last month than they do this month. The 57.9 reading was significantly lower than February's 64.7 and well below forecasts. This was the lowest reading in almost two and a half years and warns that consumers are less likely to make large purchases in the near future. Waning confidence usually translates into softer consumer spending, restricting economic growth.
It is still unclear how things will playout in Washington today. The Senate needs to pass the short-term budget funding bill today to avoid a government shutdown at midnight tonight. Many Senate Democrats have not stated publicly how they plan to vote, meaning it is anyone's guess whether it will pass or not. The markets tend not to react to a shutdown (if it happens) as much as some people think. At least not for a short shutdown. The most immediate impact would be not getting the relevant economic data from the needed agencies since it is doubtful they are not considered as essential workers. It will be interesting to see what happens today and over the weekend.
Next week brings us a key economic release on consumer spending and the second FOMC meeting of the year that will include their economic projections. There are also a few moderately important reports and another Treasury auction set. Some of the data comes from non-governmental organizations, meaning the potential shutdown wouldn't affect their release. Monday's highly important Retail Sales report does come from an agency of the government, but is likely completed already and programmed for release at 8:30 AM ET. In other words, if the government does shut down, we should still get that report and some of the other moderately important data next week. It is a longer-term shutdown that would be problematic for the bond and mortgage markets. Look for details on all of next week's scheduled activities in Sunday evening's weekly preview.
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