This week brings us the release of four 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.
Durable Goods Orders report for September will start this week’s events at 8:30 AM ET Wednesday. 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 an increase of 1.3% in new orders for products such as airplanes, appliances and electronics. 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 variance in order either way, likely will have little effect on Wednesday's bond trading or mortgage pricing.
September's New Home Sales is Wednesday’s second release, also 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 a small decline in sales of newly constructed homes, but I don't see this report having much of an impact on mortgage rates regardless what it shows. I believe the markets will be much more focused on the Durable Goods Orders data.
This week also has Treasury auctions scheduled the first four 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 the first, 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.
Friday has the remaining two reports. The first 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 2.4% in the GDP, which would mean that the economy grew at a slower pace than the 2nd quarter's 3.1% 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 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 moving little from its preliminary reading of 101.1. Good news for mortgage rates would be a sizable decline in the index, meaning consumers are likely to not spend as much as last month.
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.