This holiday-shortened week brings us the release of only two monthly or quarterly economic reports for the markets to digest along with two relevant Treasury auctions. One of those two reports is considered to be a key piece of data though. The bond market will be closed Tuesday in observance of the Veteran's Day holiday, but the stock markets will be open for business.
The first events of the week will be the two important Treasury auctions that come Wednesday and Thursday. The 10-year Treasury Note sale Wednesday is the more important of the two for mortgage rates as it will give us a better indication of demand for mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would probably result in upward revisions to mortgage rates.
The Commerce Department will give us October's Retail Sales figures early Friday morning. This data measures consumer level or retail spending. It is considered extremely important to the markets because consumer spending makes up over two-thirds of the U.S. economy. It is expected to show a 0.3% increase in retail-level spending, meaning consumers spent more last month than they did in September. A larger increase in spending would be considered negative news for bonds because rising spending fuels economic growth and raises inflation concerns in the bond market. If Friday's report reveals a decline in spending that indicates consumers spent less than thought, bonds should react favorably, pushing mortgage rates lower. If it shows an unexpected increase, mortgage rates will likely move higher.
The week's economic calendar closes late Friday morning when November's preliminary reading of the University of Michigan's Index of Consumer Sentiment is posted. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 87.5, up from October's final reading of 86.9. That would be considered negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. And with consumer spending so important, any related data is watched closely. The lower the reading, the better the news it is for mortgage shoppers.
Overall, Friday is likely to be the most active day for mortgage rates with all of this week’s data scheduled, including the highly important Retail Sales report. The calmest will probably be Tuesday since I see many lenders being open for business despite the bond market closure. There is a good possibility of seeing a fairly calm day tomorrow also as some bond trading firms may be on skeleton staff ahead of the holiday Tuesday. Despite the light economic calendar, there is still a decent chance of seeing a noticeable move in rates this week.