This holiday-shortened week brings us the release of four relevant economic reports for the markets to digest in addition to a couple of Treasury auctions and the minutes from the most recent FOMC meeting. All of the week's mortgage-relevant events are being posted over just two days, partly due to the Thanksgiving holiday. Therefore, the middle days of the week should be the most interesting for mortgage shoppers.
October's Existing Home Sales data will start the week's calendar late Tuesday morning. The National Association of Realtors will give us a measurement of housing sector strength and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a small decline, meaning the housing sector softened slightly last month. That would be relatively good news for the bond market and mortgage pricing, but unless it shows a significant surprise, it will likely not have a major impact on mortgage rates.
Wednesday has the remaining three economic reports that we need to be concerned with. The first is October's Durable Goods Orders at 8:30 AM ET. This data helps us measure manufacturing strength by tracking orders for big-ticket items or products that are expected to last three or more years, such as airplanes, appliances and electronics. This data is known to be quite volatile from month-to-month, so sizable swings from the previous month are fairly normal. It is expected to show a 1.1% rise in new orders. A smaller than expected increase would be considered good news for the bond market and mortgage rates as it would indicate the manufacturing sector was not as strong as thought. We need to see a sizable variance from forecasts though for the markets to have a noticeable reaction due to the usual volatility in the data. It is worth mentioning though that this is one of the more important reports we get each month.
November's Consumer Confidence Index (CCI) will be released late Wednesday morning by the Conference Board. This index helps us track consumer willingness to spend. If a consumer's confidence in their own financial and employment situation is strong, analysts believe that they are more apt to make larger purchases, fueling economic growth. This is important because consumer spending makes up over two-thirds of the U.S. economy and makes long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to no change in confidence from last month's level, meaning surveyed consumers were just as optimistic about their own financial situations this month than they were last month. A weaker reading than the 91.6 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Wednesday.
October's New Home Sales report will close out the week's economic calendar at 10:00 AM also. It will give us an indication of housing sector strength, but is the week's least important release. Analysts are expecting to see a decline between September and October's sales of newly constructed homes. It will take a large change in sales for this data to influence mortgage rates, partly because this report tracks such a small portion of all home sales. Tuesday’s report covers most of the home sales in the U.S.
Also worth noting is the release of the minutes from the last FOMC meeting Wednesday afternoon that can have an impact on the financial and mortgage markets. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly if a rate increase will come next month. They will be released at 2:00 PM ET, so any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a non-factor. If they show anything surprising regarding when the Fed will raise key short-term interest rates again, we will see some movement in rates Wednesday afternoon.
In addition to this week's economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes Tuesday and 7-year Notes on Wednesday. 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 in mortgage rates. However, strong investor demand usually make bonds more attractive to investors and brings more funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates. Results of the Tuesday's sale will be posted at 1:00 PM ET while Wednesday's will be at 11:30 AM ET. Any reaction to the sales will come shortly after results are posted.
The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but the stock and bond markets will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. The same can be said to some degree Wednesday afternoon also. Banks must be open Friday, but we will likely see little change to mortgage rates that day.
Overall, I am expecting Wednesday to be the busiest day for the bond market and mortgage rates with three of the week's releases scheduled plus an auction and FOMC minutes. The calmest day of the week will most likely be Friday as many traders will be home for the long weekend rather than in the office working. The recent spike in bond yields and mortgage rates may not be over.