This week brings us the release of four pieces of economic data that may impact mortgage rates in addition to two Treasury auctions. None of the events are considered key or expected to be a market mover, but most of the reports carry enough importance to affect mortgage pricing if they show a decent sized variance from forecasts. There is nothing set for release today, leaving the stock markets to be most likely force behind a noticeable move in rates tomorrow.
The first release of the week will be April's New Home Sales report at 10:00 AM ET Tuesday. It is the sister report of last week's Existing Home Sales. This data gives us a similar measurement of housing sector strength and future mortgage credit demand, but tracks a much smaller portion of housing sales than that report did. Actually, it probably will not have much of an impact on mortgage pricing unless it shows a sizable variance from forecasts. Analysts are expecting to see gains in sales from March's level, meaning the new home portion of the housing sector strengthened last month.
Wednesday has nothing scheduled that is expected to affect mortgage rates except the first of this week's two Treasury auctions that are worth watching. The Fed will auction 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. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours Wednesday and Thursday.
April's Durable Goods Orders is Thursday’s only monthly report. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years such as airplanes, appliances and electronics. It is currently expected to show an increase in new orders of approximately 0.6%, hinting that the manufacturing sector strengthened a little last month. That would be relatively bad news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts will likely have little impact on Thursday's mortgage rates. The larger the decline, the better the news it is for mortgage rates.
Friday has two reports scheduled that are relevant to mortgage rates. The first revision to the 1st quarter Gross Domestic Product (GDP) will come at 8:30 AM ET. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth. Last month's preliminary reading revealed a 0.5% annual rate of growth. Analysts expect an upward revision of 0.4% in this update, equating to economic growth of 0.9%. If the revision comes in much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter. Since bonds tend to thrive in weaker economic conditions, a softer than predicted reading would be good news for mortgage rates.
The last mortgage-related data of the week will come from the University of Michigan late Friday morning when they update their Index of Consumer Sentiment for May. This type of data is watched fairly closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Friday's report is expected to show a small downward revision to this month's preliminary reading of 95.8. A higher reading would be considered bad news for bonds and mortgage pricing while a larger decline should help boost bond prices and lead to a slight improvement in rates.
Overall, I think Thursday is the best candidate for most active day for mortgage rates this week although Friday's GDP reading will draw plenty of attention also if it shows a sizable revision. With two relatively important reports scheduled for Friday, it may also be an active day. The least active day will probably be Wednesday unless the stock markets rally or show sizable losses.