This week has only four monthly economic reports set for release in addition to a 20-year Bond auction and public speaking engagements by current Fed members. Drawing the most attention will be the FOMC meeting that begins Tuesday and ends Wednesday afternoon. Tomorrow is the only day of the week without at least one item scheduled.
The week’s activities start Tuesday morning with the release of August's Housing Starts. This report tracks groundbreakings of new home projects but likely will not affect mortgage rates unless it varies greatly from forecasts. Analysts are expecting to see a minor increase in starts of new homes last month, indicating modest growth in the new home part of the housing sector. A stronger housing sector makes broader economic growth more likely, meaning the softer the number of starts in this report, the better the news it is for rates.
Also Tuesday is the 20-year Treasury bond auction. 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 Tuesday afternoon. However, if investor interest in the sale was lackluster, we could see bonds weaken and mortgage rates move higher during afternoon trading.
Wednesday has several events that have the potential to move rates. They will start with August's Existing Home Sales report at 10:00 AM ET. The National Association of Realtors is expected to announce that the number of home resales in the U.S. slipped last month, indicating weakness in the housing sector. A softening housing sector makes broader economic growth more difficult, making bonds more appealing to investors. Therefore, bond traders would prefer to see a larger decline in sales. Since this report carries only a medium level of importance, it will take a noticeable variance from forecasts for it to cause a noticeable change rates.
The big events of the week will come Wednesday afternoon. They start with the FOMC meeting that will adjourn at 2:00 PM ET. There is little chance of the Fed changing key short-term interest rates this week. What will be of interest is verbiage in the post-meeting statement regarding inflation, tapering of their monthly bond purchases and when the Fed may start raising key short-term interest rates.
Also at 2:00 PM ET Wednesday, the Fed will release their revised economic projections for the U.S. The markets are interested in whether Chairman Powell and friends think the economy is rebounding quicker or slower than previously thought and how long they expect to keep key rates at their current level of near zero percent. Key readings the markets will be looking for are the unemployment rate, inflation and overall GDP growth. Downward revisions by the Fed will be good news for bonds and mortgage pricing since it would mean the economy is not as strong as they expected.
The adjournment, post-meeting statement and economic projections will be followed by a press conference with Chairman Powell at 2:30 PM ET. Analysts and market traders will be watching his words carefully.
Thursday’s monthly report will come from the Conference Board, who will post their Leading Economic Indicators (LEI) for August. The moderately important LEI index attempts to predict economic activity over the next three to six months. It is expected to show a 0.6% increase. A larger increase would be considered negative news for bonds and mortgage pricing.
Friday will close out the week’s calendar with August's New Home Sales report. The Commerce Department is expected to say at 10:00 AM ET that sales of newly constructed homes rose last month, but this report will likely not have a noticeable impact on mortgage rates unless it differs greatly from forecasts. It is the week's least important report in terms of potential impact on mortgage rates, partly because it covers only the small portion of all homes sales that Wednesday's Existing Home Sales report did not.
Also worth noting is a speaking engagement by Fed Chairman Powell Friday morning. He will be speaking via webcast. Anytime he speaks, the markets listen. It is hard to imagine that we will get a major surprise in such a short time after his press conference two days earlier. Still, we could see rates react heavily to something he says at this appearance.
Overall, Wednesday is the key day of the week due to the FOMC events. The calmest day will likely be either tomorrow or Thursday. It is fairly safe to assume that it will be a pretty active week for rates, but the most movement will come during the middle days.