Mortgage Market Update
This week brings us the release of only three monthly economic reports and a moderately important Treasury auction. It starts off light with nothing scheduled for tomorrow, but don’t be surprised to see bonds open the week with gains and a possible improvement to rates.
June's Housing Starts report is the first piece of data, set for 8:30 AM ET Tuesday. It will give us an indication of housing sector strength and future mortgage credit demand, but usually doesn't cause much movement in mortgage rates unless it varies greatly from forecasts. This month's release is expected to show an increase in new home groundbreakings from May's starts. The lower the number of starts, the better the news it is for the bond market since it would indicate a weaker than expected new home portion of the housing sector.
Wednesday doesn’t have any relevant economic data scheduled but does have a 20-year Treasury bond auction taking place. Results will be posted at 1:00 PM ET, making this an early afternoon event. A strong demand for the securities could help improve bonds and lead to slightly lower mortgage rates. However, if investor interest in the sale was lackluster, we could see bonds weaken and mortgage rates move higher Wednesday afternoon.
In addition to last week's unemployment figures, Thursday also has two monthly reports scheduled. June's Existing Home Sales from the National Association of Realtors is one, coming at 10:00 AM ET Thursday morning. This report gives us a measurement of housing sector strength and mortgage credit demand. Current forecasts are calling for an increase from May's sales. A drop in sales would be considered good news for bonds and mortgage rates because a weakening housing sector makes broader economic growth more difficult. However, unless this data varies greatly from forecasts it probably will lead to only a minor change in mortgage rates.
Next up Thursday is June's Leading Economic Indicators (LEI) at 10:00 AM ET. This Conference Board index attempts to measure economic activity over the next three to six months. While it is not a factual report, it still is considered to be of moderate importance to the bond market. It is expected to show a 0.9% increase, meaning it is predicting economic growth over the next few months. A smaller increase, or a decline, in the index would be good news for the bond and mortgage markets.
Corporate earnings season kicks into high gear this week. These announcements don't directly impact mortgage rates, but they do heavily influence stocks, which can have an indirect impact on bond trading and mortgage pricing. Generally speaking, bad news for stocks is good news for bonds and rates. If some of the major companies reporting this week announce weaker than expected earnings and/or future earnings projections, stocks should move lower along with mortgage rates.
Overall, Thursday is the best candidate for most active day for rates. Although, there is no reason to believe we will see a sizable move in rates any day. Calmest day may end up being Tuesday or Friday. We should see mortgage pricing remain fairly calm this week unless something unexpected happens.