This week brings us the release of six pieces of relevant economic data along with two Treasury auctions that have the potential to affect mortgage rates. The week starts of slow with nothing of importance set for release tomorrow. It is the only day that doesn’t have something scheduled that is likely to affect mortgage pricing. Most of the reports can influence mortgage rates but none of them are considered extremely important or key data.
The first will come from the New York-based Conference Board late Tuesday morning when they post their Consumer Confidence Index (CCI) for March. This index gives us an indication of consumers' willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that confidence in their own financial situations is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show little change from February's 78.1 reading. The lower the reading, the better the news it is for bonds and mortgage rates.
Also late Tuesday morning, the Commerce Department will give us February's New Home Sales figures. They are expected to announce a decline in sales of newly constructed homes. This report tracks a much smaller percentage of home sales than last week's Existing Home Sales report covered, so it should have a much weaker influence on the markets and mortgage pricing. A large increase in sales would be negative for the bond market and mortgage pricing because it would point towards economic strength.
Wednesday’s only economic data is February's Durable Goods Orders at 8:30 AM ET. This Commerce Department report gives us a measurement of manufacturing sector strength by tracking new orders for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be volatile from month to month but is still considered to be of fairly high importance to the markets. Analysts are expecting it to show an increase in new orders of approximately 1.0%. A much larger increase would be considered negative for bonds as it would indicate economic strength and could lead to higher mortgage rates Wednesday morning. Since these orders are volatile, it will take a wider variance from forecasts for it to move mortgage rates than other data requires.
The next relevant data is Thursday's final revision to the 4th Quarter GDP. This is the second and final revision to January's preliminary reading of the U.S. Gross Domestic Product, or the sum of all goods and services produced in the U.S. The GDP is the benchmark measurement of economic activity. It is expected to show that the economy grew at an annual pace of 2.6% last quarter, up from the previous estimate of 2.4% that was released last month. Analysts are now more concerned with next month's preliminary reading of the 1st quarter than data from three to six months ago, so I don't expect this report to affect mortgage rates much.
Friday has the remaining two reports that could affect mortgage rates. The first is February's Personal Income & Outlays report early Friday morning. This data helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending related information has on the financial markets. If a consumer's income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.2% increase in income and a 0.3% rise in spending. Smaller than expected increases would be good news for bonds and mortgage shoppers.
The final report of the week comes from the University of Michigan just before 10:00 AM ET Friday. Their revision to their March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers' willingness to spend. As with Tuesday's CCI report, rising confidence is considered bad news for the bond market and mortgage pricing. Friday's report is expected to show little change from the preliminary reading of 79.9. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.
In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
Overall, I believe Tuesday or Friday will be the most active day for mortgage rates with multiple reports and some of the more important data of the week set for those days. The calmest day will likely be tomorrow although we still could see some movement in rates. Stock strength, particularly on days with no relevant economic data to drive trading, usually pressures bonds and often leads to an increase in mortgage pricing. Falling stocks tend to make bonds more appealing and leads to lower mortgage rates.