This week brings us the release of only two pieces of moderately important economic data for the bond market to digest along with the minutes from the most recent FOMC meeting. There are also a couple of Treasury auctions mid-week that have the potential to affect mortgage rates. Making things a little more interesting is the fact that all of the week's events take place over only three days. The financial markets will be closed tomorrow in observance of the President's Day holiday, so don't expect to see new mortgage pricing until Tuesday morning. Due to the holiday, this report will not be updated tomorrow.
The first piece of data is January's Existing Home Sales report by the National Association of Realtors late Wednesday morning. This data tracks home resales throughout the country, giving us a measurement of housing sector strength. It is expected to show a decline in sales of existing homes, meaning the housing sector softened last month. Ideally, the bond market would like to see a sizable decline in sales because weak housing makes broader economic growth more difficult. Since long-term securities such as mortgage bonds tend to thrive during weaker economic conditions, weak housing numbers would be good news for mortgage rates.
Wednesday also brings us the release of the minutes from the most recent FOMC meeting. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly when the next rate increase may come. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. These minutes may lead to afternoon volatility Wednesday, or they may be a non-factor. However, they do carry the potential to influence mortgage rates, so they should be watched.
The final monthly report of the week will be January's Leading Economic Indicators (LEI) late Friday morning. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.8% increase, meaning that economic activity should expand in the near future. A smaller increase would be good news for the bond market and mortgage rates. This data is not considered to be highly important, so a sizable variance from forecasts is needed for it to directly affect mortgage rates.
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 Notes Wednesday and 7-year Notes on Thursday. 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 to mortgage rates. On the other hand, sales with higher levels of investor demand usually make bonds more attractive to investors and bring additional funds into the bond market. The buying of bonds that follows often translates into lower mortgage rates.
Overall, Wednesday stands out as the most important day due to the moderately important housing report, 5-year Note auction and the release of the FOMC minutes all taking place. None of those events are highly important by themselves, but combined they carry enough significance to cause a noticeable move in mortgage rates. The calmest is likely to be Friday unless stocks stage a strong rally or sell-off. Despite the lack of highly important data, it still would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.