This holiday-shortened week brings us the release of four relevant economic reports for the markets to digest in addition to the minutes from the most recent FOMC meeting. All of the week's mortgage-relevant events are being posted over just three days, partly due to the Thanksgiving holiday. Therefore, the middle days of the week should be the most interesting for mortgage shoppers.
The first report of the week will come from the Conference Board at 10:00 AM ET tomorrow, when they release their Leading Economic Indicators (LEI) for October. This is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.7% increase, meaning economic activity will likely rise moderately over the next couple of months. Generally speaking, this would be bad news for bonds. However, since this data is considered only moderately important, its results need to miss forecasts by a wide margin for it to affect mortgage rates.
October's Existing Home Sales data is next, coming 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 increase, meaning the housing sector strengthened slightly last month. That would be relatively bad news for the bond market and mortgage pricing, but unless it shows a significant surprise, it shouldn’t have a major impact on mortgage rates.
Wednesday has the remaining two 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 0.4% rise in new orders. A decline 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 the most important report of the week.
The second report of the day will be the revised University of Michigan Index of Consumer Sentiment for November. Current forecasts are calling for a slight increase (97.9 from 97.8), meaning surveyed consumers felt nearly the same about their own financial and employment situations as they did in October. Bond traders would prefer to see a decline because waning confidence usually means consumers are less likely to make a large purchase in the near future, restricting economic growth.
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 something that would hint that a rate increase will not come next month as it is widely expected to. 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 or the balance sheet reduction plan, we will see some movement in rates Wednesday afternoon.
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 including the 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. Despite the holiday, this still may end up being an active week for mortgage rates. Accordingly, please proceed extremely cautiously if still floating an interest rate and closing in the near future.