There is only one monthly economic report scheduled that we need to be concerned with during this holiday-shortened week. In addition to that piece of data, there are also a couple of Treasury auctions and a report from the Fed that we will be watching. All of the important events come during the middle and latter days, so we should see rates move more as the week progresses.
Wednesday afternoon will start this week's activities with the first of two Treasury auctions that have the potential to influence mortgage rates. 10-year Treasury Notes will be sold Wednesday while 30-year Bonds will go Thursday. It is fairly common to see some weakness in bonds before these sales as investors prepare for them. If they are met with a decent demand from investors, indicating that interest in longer-term securities, such as mortgage-related bonds is strong, the earlier losses are usually recovered after the results are announced. The results of each sale will be posted at 1:00 PM ET on auction day. If demand was indeed strong, particularly from international investors, we should see mortgage rates improve during afternoon trading Wednesday and/or Thursday. However, weak levels of interest could lead to selling in the broader bond market that could push mortgage rates higher.
Also Wednesday afternoon is when the Federal Reserve will release its Beige Book. This 2:00 PM ET report details current economic conditions in the U.S. by Federal Reserve regions. It is believed to be a key source of data when the Fed meets for their FOMC meetings and is usually released approximately two weeks prior to each meeting. If it reveals any significant surprises or changes from the previous release, we may see movement in the markets and mortgage pricing as analysts adjust their theories on the Fed's future actions to support the economy or slowing their monthly bond purchases.
August's Producer Price Index (PPI) is the only monthly economic report of the week, set for early Friday morning. It will give us an indication of inflationary pressures at the producer level of the economy. There are two readings that analysts follow in this release. They are the overall index and the core data. The core reading is the more important of the two since it excludes more volatile food and energy prices. Analysts are predicting a 0.6% increase in the overall reading and a 0.6% rise in the core data. Stronger than expected readings could fuel further inflation concerns in the bond market that would be bad news for bonds and mortgage rates.
Overall, Friday is likely to be the most active day for rates, but we may see some movement Wednesday afternoon also. The best candidate for calmest day is Thursday since the markets can get active after a long weekend, meaning we may see rates move a little Tuesday. Even though we don't have a lot to watch this week, it still could be a relatively active few days for rates. Therefore, keep an eye on the markets if still floating your interest rate and closing in the near future.