This week brings us four relevant economic reports along with a couple of Treasury auctions, the minutes from the most recent FOMC meeting and a large number of Fed speaking engagements. None of the economic releases are considered to be highly important, but several carry enough significance to change rates. There really is nothing of importance set for tomorrow or Friday, meaning that we will likely see the most movement in rates the middle days. Despite not having anything scheduled tomorrow though, we may still see some movement in the financial and mortgage markets as they react to news this weekend that indicates Britain’s withdrawal from the Eurozone (Brexit) is proceeding.
November's Consumer Confidence Index (CCI) will start this week’s activities late Tuesday morning. This Conference Board 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 in the near future, 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 a 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 135.5 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher Tuesday.
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 Tuesday and 7-year Notes on Wednesday. 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 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.
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 a slight upward revision to last month's preliminary reading of a 3.6% 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 3.7% 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. This data is somewhat aged at this point covering the July, August and September months. 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 updates and analysts are looking more towards the current quarter's activity than what happened during late summer and early fall.
October's New Home Sales report is next, at 10:00 AM Wednesday. It will give us an indication of housing sector strength but is the week's least important release. Analysts are expecting to see an increase 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.
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 0.4% and that spending also increased 0.4%. 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.
Also worth noting is the release of the minutes from the November 7-8 FOMC meeting Thursday 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. There is a wide consensus that the Fed will make another quarter-point rate increase at next month’s meeting. What traders are more interest in is any indication of what the Fed will do next year in terms of the number of rate hikes. 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 it is posted or could be a non-factor. If the minutes show anything surprising, we will see some movement in rates Thursday afternoon.
It is common for Fed members to have public speaking engagements. Most of them are not of much concern since some topics are not directly related to mortgage rate relevant matter. However, because their words can give insight to the Fed’s general logic or plans, they are always watched. This week has a couple of speaking events that are more important than others, including Fed Chair Powell’s at 11:30 AM ET Wednesday. He will be speaking at the Economic Club in New York, so the markets will be focused on his speech.
Overall, the most active day for mortgage rates will likely be Wednesday or Thursday. There is not single event that makes them the best candidate. It’s the fact there are multiple events scheduled throughout the day that make them a higher priority than other days. The G20 Summit starts Thursday in Buenos Aires, Argentina and we could see some reaction to events there also late this week, but it is difficult to predict what or when. Lastly, stocks are still likely to be a heavy contributor to bond movement this week, which can happen any day. Therefore, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.