This holiday-shortened week brings us the release of only three monthly or quarterly economic reports for the markets to digest along with two relevant Treasury auctions. One of those three reports is considered to be a key piece of data though. The bond market will be closed Wednesday in observance of the Veteran's Day holiday, but the stock markets will be open for business.
There is nothing of importance scheduled for Monday, so we can expect bonds and mortgage rates to be driven by stock movement. Friday’s Employment report-fueled bond sell-off could extend into Monday’s trading, pressuring rates to start the week.
The first events of the week will be the two important Treasury auctions Thursday. Due to the holiday Wednesday, both auctions will be held Thursday instead of two days. 10-year Treasury Notes and 30-year Bonds will be sold, giving us an indication of demand for long-term securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading Thursday. 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 will probably result in upward revisions to mortgage rates.
Friday has all three monthly reports. The Commerce Department will give us October's Retail Sales figures at 8:30 AM ET. This data measures consumer or retail level 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, 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.
Next up is October's Producer Price Index (PPI), also at 8:30 AM ET. This is considered to be a key inflation reading that tracks inflationary pressures at the manufacturing level of the economy. There are two portions of the index that are used- the overall reading and the core data reading. The core data is the more important of the two because it excludes more volatile food and energy prices. Signs of rapidly rising inflation make long-term securities such as mortgage-related bonds less attractive to investors and leads to higher mortgage rates. The overall reading is expected to show a 0.1% increase from September while the core data is expected to rise 0.1% also. Weaker than expected readings would be good news for bonds and mortgage rates, while a larger than forecasted increase in the core reading could lead to higher mortgage rates Friday morning.
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 92.0, up from October's final reading of 90.0. 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 Wednesday 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 Tuesday also as some bond trading firms may be on skeleton staff ahead of the holiday. Despite the light economic calendar, there is still a decent chance of seeing a noticeable move in rates this week.