This week brings us the release of four pieces of economic data that are likely to affect mortgage rates. Only one is considered to be very important and even it fails to move the markets or mortgage pricing many months. But was we saw multiple days last week, we don’t necessarily need to have key data being posted to have havoc in the markets.
The National Association of Realtors will start the week's activities with the release September's Existing Home Sales data late Tuesday morning. This report gives us an indication of housing sector strength and mortgage credit demand by tracking home resales. I don't see it having much of an influence on the bond market or mortgage rates, but a reading that varies greatly from analysts' forecasts could lead to a slight change in mortgage pricing. It is expected to show an increase in sales from August to September, meaning the housing sector strengthened. That would be bad news for the bond market since a strengthening housing sector makes broader economic growth more likely and bonds less appealing to investors.
September's Consumer Price Index (CPI) will be posted Wednesday at 8:30 AM ET. It measures inflationary pressures at the very important consumer level of the economy and is one of the most important reports that the bond market gets each month. Analysts are expecting to see no change in the overall index and an increase of 0.2% in the core data. A larger than expected increase in the core reading could raise inflation concerns, pushing bond prices lower and mortgage rates higher. Inflation is the number one nemesis of the bond market because it erodes the value of a bond's future fixed interest payments. When inflation is a threat, even down the road, bonds sell for discounted prices that push their yields higher. And since mortgage rates tend to follow bond yields, this leads to higher rates for mortgage borrowers.
Thursday also has a single monthly report scheduled that is worth watching. September's Leading Economic Indicators (LEI) will be released by the Conference Board at 10:00 AM ET Thursday morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.6% from August's reading. This would indicate that economic activity is likely to increase over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline though.
The final report of the week is September's New Home Sales at 10:00 AM ET Friday. This data covers the small percentage of home sales that Tuesday's Existing Home Sales report didn't include. It is expected to show a decline in sales of newly constructed homes, but regardless of its results I am not expecting it to have a significant impact on mortgage rates Friday.
Overall, Wednesday has the most important report but unless it shows some significantly strong or weak results, it should only have a minor impact on this week’s rates. Tomorrow is the only day with nothing scheduled, so by default we can label it the best candidate for calmest day. However, if we see last week’s volatility carry into this week’s trading, all bets are off as any day could be extremely active for bonds and mortgage pricing.