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 or Tuesday. Despite having events scheduled only three days, there is still a decent chance of seeing another active week for mortgage rates.
September's New Home Sales will start the week’s calendar late Wednesday morning. This Commerce Department 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 unless it shows a significant variance from forecasts.
Durable Goods Orders data for September is Thursday’s sole monthly release, scheduled for 8:30 AM ET. 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 a 1.8% decline 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 larger 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 orders either way, likely will have little effect on Thursday's bond trading or mortgage pricing.
This week also has Treasury auctions scheduled several 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 the GDP to grow at an annual rate of 3.3% , which would mean that the economy grew at a slower pace than the 2nd quarter's 4.2% 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 noticeable increase in mortgage pricing Friday morning.
The week's last report comes at 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 remaining unchanged from its preliminary reading of 99.0. 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, Friday is the best candidate for most important day of the week because of the GDP reading set for release, but Thursday may also be an active day. The calmest day will probably be Tuesday unless something unexpected happens. We are still in corporate earnings season for the stock markets, so stocks will also play a relevant role in this week’s bond trading and mortgage rates movement.