This week brings us the release of six pieces of economic data that may influence mortgage rates in addition to two Treasury auctions and the annual Jackson Hole Fed conference. There is nothing of importance set for tomorrow, but there are at least two events or reports scheduled every other day of the week. Only one of the reports can be considered very important. However, with so much going on we still could see an active week in the financial and mortgage markets.
July's New Home Sales data is the first report of the week, coming Tuesday morning at 10:00 AM ET. This report will give us another indication of housing sector strength and mortgage credit demand, but tracks only a small portion of all home sales. The majority of U.S. home sales were covered in last week's Existing Home Sales report. It usually doesn't have much of an impact on bond prices or mortgage rates unless it varies greatly from forecasts. Current forecasts are calling for an increase in sales of newly constructed homes from June to July. A larger increase in sales would indicate housing sector strength, making the data negative for mortgage rates.
The Conference Board will post their Consumer Confidence Index (CCI) for August at 10:00 AM ET Tuesday also. This index measures consumer sentiment about their personal financial situations, which helps us measure consumer willingness to spend. If consumers are feeling more confident in their own finances and employment, they are more apt to make a large purchase in the near future, fueling economic growth. A decline in confidence would indicate that surveyed consumers probably will not be buying something big in the immediate future. That would be a sign of economic weakness and should drive bond prices higher, leading to lower mortgage rates Tuesday. It is expected to show a reading of 92.6, which would be an increase from July's 90.9. The lower the reading, the better the news it is for bonds and mortgage rates.
July's Durable Goods Orders will be released by the Commerce Department early Wednesday morning, giving us an important measure of manufacturing sector strength. This report tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as appliances, electronics and airplanes. Analysts are expecting to see a decline of 0.8% in new orders, indicating manufacturing sector weakness. This data is known to be quite volatile from month to month, so a decline of this size doesn't raise too much concern about the economy. However, a decent sized decline is good news for the bond market and mortgage rates as it means manufacturing activity is likely softening. A secondary reading the excludes more volatile transportation-related orders is expected to rise 0.5%. The softer the reading, the better the news it is for the bond and mortgage markets.
Thursday's only monthly or quarterly data is the first revision to the 2nd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. This reading is the second of three that we see each quarter. Last month's preliminary reading revealed that the economy grew at an annual rate of 2.3%. Thursday's revision is expected to show that the GDP actually rose 3.1%, meaning the economy was stronger than previously thought from April through June. A smaller than expected reading should help lower mortgage rates, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates since traders will be more interested in the current quarter's activity.
Friday is a multi-release day with two pieces of economic data set to be posted. July's Personal Income and Outlays report is the first at 8:30 AM ET. This data will give us a measure of consumer ability to spend and current spending habits. Rising income means consumers have more money to spend. It is expected to show an increase of 0.3% in income and a 0.4% increase in spending. Since consumer spending makes up over two-thirds of the U.S. economy, weaker than expected numbers would be considered good news for the bond market and mortgage pricing.
The second report of the morning will be the University of Michigan's revised Index of Consumer Sentiment for August. This sentiment index helps us track consumer willingness to spend similarly to Tuesday's CCI. It is expected to show little change from August's preliminary reading of 92.9. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future. As with the CCI index, the lower the reading the better the news for mortgage shoppers.
There are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. There are auctions several days, but the two relevant ones are Wednesday's 5-year Note and Thursday's 7-year Note sales. Results of these will be posted at 1:00 PM ET each day. If investor interest is strong in the auctions, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons.
Also worth noting is the annual central banker conference in Jackson Hole, Wyoming. There have been major events to come out of this event in the past while others have been non-factors. Federal Reserve Chair Janet Yellen is not scheduled to speak this year. The conference runs Thursday through Saturday, so we could still see the markets react to something from this event. Any impact on trading or mortgage rates will happen Thursday or Friday.
Overall, I am expecting to see the most movement in rates Wednesday, although Tuesday could be a fairly active day also. We need to watch the stock markets for rate direction only as their significant selling helped bonds to rally last week. Generally speaking, stock strength often hurts the bond market while stock losses make bonds more appealing to investors. Despite the lack of what we consider key economic data, we should still see plenty of movement rates this week.