This week brings us six economic reports along with Fed congressional testimony and a couple of Treasury auctions. One of the economic releases is considered to be highly important as is the Fed testimony. There is at least one relevant report being posted every day of the week, making it likely to be an active week for mortgage rates.
October's New Home Sales report will start this week's economic calendar at 10:00 AM tomorrow. 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. Last week's Existing Home Sales report covers most of the home sales in the U.S.
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 tomorrow and 7-year Notes on Tuesday. 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 makes 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 sales will be posted at 1:00 PM ET both days. Any reaction to the sales will come shortly after results are posted.
November's Consumer Confidence Index (CCI) will be released late Tuesday 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 strength in it makes long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to see decline in confidence from last month's level, meaning surveyed consumers were less optimistic about their own financial situations this month than they were last month. A weaker reading than the 124.0 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.
Wednesday has several events that we will be watching, starting with the first revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. It is expected to show an upward revision to last month's preliminary reading of a 3.0% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the benchmark measurement of economic growth. Current forecasts call for a 3.2% rate, meaning that there was a tad more economic activity during the third quarter than previously thought. This would be bad news for the bond market and mortgage rates because strengthening economic growth makes bonds less appealing to investors that hurts bond prices and mortgage rates. Unless we see a much larger increase or a downward revision, I suspect this release will have a minimal impact on mortgage rates. It is the second of three monthly updates and analysts are looking more towards the current quarter's activity than what happened during late summer and early fall.
Next up is a congressional appearance by Fed Chair Janet Yellen at 10:00 AM ET. She will be updating a joint committee on the status of the economy. These types of appearances are widely watched and can have a significant influence on the financial and mortgage markets if they yield any surprises on the strength of the economy or changes to the Fed’s monetary policy plans. Her prepared statement may be released prior to her appearance, so a reaction may come during early morning trading.
Later Wednesday, the Federal Reserve will release their Beige Book at 2:00 PM ET. This report is named simply after the color of its cover and details economic conditions by Fed region. That information is relied upon heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any noticeable changes from the last update. More times than not though, this report will not influence the markets enough to cause intra-day changes to mortgage rates, but the potential to do so does exist.
October's Personal Income and Outlays data is Thursday’s sole monthly release. This data measures consumers' ability to spend and their current spending habits. It is important because consumer spending is such a large part of the U.S. economy. It is expected to show that income rose 0.3% and that spending also increased 0.3%. Weaker than expected readings would mean consumers had less money to spend and were spending less than thought. That would be favorable news for bonds and could lead to improvements in mortgage rates Thursday morning.
Friday has a major release scheduled with November's Institute for Supply Management’s (ISM) manufacturing index at 10:00 AM ET. This index measures manufacturer sentiment and can have a considerable impact on the financial markets and mortgage rates. Current forecasts call for a small increase in sentiment from October to November. October's reading was previously announced as 58.7. A weaker reading than the expected 58.3 would be good news for the bond market and mortgage rates, especially if it moves much closer to 50.0. A reading below that threshold means that more surveyed business executives felt business worsened during the month than those who felt it had improved. The lower the reading the better the news it is for bonds because waning sentiment indicates a slowing manufacturing sector and makes broader economic growth less likely.
Overall, Wednesday is the best candidate for most active day because there are two economic releases along with Fed Chair Yellen’s testimony, but Friday may be a busy day also due to the ISM report. The calmest day may be tomorrow, although we can expect to see movement in rates most, if not all, days this week. Because of the busy calendar, it would be extremely prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.