This week brings us the release of six economic reports that may influence mortgage rates in addition to two Treasury auctions that have the potential to do so also. The most important data comes later in the week and there is nothing of relevance set for tomorrow. Despite the lack of economic data, we still could see movement in the bond and mortgage markets tomorrow as the week begins.
October's Consumer Confidence Index (CCI) will start the week’s calendar late Tuesday morning. This Conference Board index gives us a measurement of consumer willingness to spend. It is expected to show a drop in confidence from last month's 104.1 reading. That would mean that consumers did not feel as good about their own financial and employment situations as they did last month, indicating they are less likely to make large purchases in the near future. That would be good news for the bond market because consumer spending makes up over two-thirds of our economy. Current forecasts are showing a reading of 100.8. The lower the reading, the better the news it is for mortgage rates.
September's New Home Sales is Wednesday’s only data, coming from the Commerce Department. This report covers the small percentage of home sales that last week's Existing Home Sales report didn't include. It is expected to show little change in sales of newly constructed homes, but I don't see this report having much of an impact on Wednesday's mortgage rates regardless what it shows. I believe the markets will be much more focused on other events this week.
Durable Goods Orders report for September will be posted at 8:30 AM ET Thursday. It gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for no change in new orders. If we see a large increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a significant decline should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small move either way likely will have little effect on Thursday's bond trading or mortgage pricing.
Friday has the remaining three reports. The first of the batch is the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. and therefore is likely to have a major impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Friday's release is the first and usually has the biggest influence on the markets. Current forecasts call for an increase of approximately 2.5% in the GDP, which would mean that the economy grew at a noticeably stronger pace than the 2nd quarter's 1.4% rate. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a larger than expected rise could lead to a rally in stocks, bond selling and a sizable increase in mortgage pricing Friday morning.
The 3rd Quarter Employment Cost Index (ECI) will also be released at 8:30 AM ET Friday. It is the least important of the day's three reports. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raise wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.6%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week. And since it comes at the same time as the initial GDP reading.
The week's last report comes just before 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers' willingness to spend. Current forecasts show this index rising slightly from its preliminary reading of 87.9 to 88.3. Good news for mortgage rates would be a sizable decline in the index.
This week also has Treasury auctions scheduled the first three days. The only two that have the potential to influence mortgage rates are Wednesday's 5-year and Thursday's 7-year Note sales. If those sales are met with a strong demand from investors, particularly Wednesday's auction, bond prices may rise during afternoon trading. This could lead to improvements to mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to slight upward revisions to mortgage rates.
Overall, look for Friday to be the most active day for mortgage rates, although stock earnings news could still affect the broader markets and possibly mortgage rates any day. I suspect this will be a fairly active week for mortgage rates but the likelihood of seeing a significant move in rates seems to be somewhat limited to Friday unless something unexpected happens.