This holiday-shortened week has only two monthly economic reports scheduled for release that are relevant to mortgage rates in addition to a couple of potentially influential Treasury auctions. There is nothing of importance set for tomorrow other than an early close for both stocks and bonds. The financial and mortgage markets will be closed Tuesday in observance of the Christmas Day holiday and will reopen for regular trading Wednesday.
The first event of the week will be the 5-year Treasury Note auction Wednesday. It will be followed by a 7-year Note sale Thursday. If these sales are met with a strong demand, bond prices may rise enough to lead to improvements in mortgage rates shortly after the results are posted. But a lackluster demand from investors may create bond selling and upward revisions to mortgage rates Wednesday and/or Thursday. Results will be announced at 1:00 PM each day, so any reaction will come during early afternoon trading.
Thursday has both economic reports scheduled. The Conference Board will post their Consumer Confidence Index (CCI) for December at 10:00 AM ET. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a decline in confidence from November's reading of 135.7. Analysts are expecting Thursday's release to show a reading of 134.0, meaning consumers felt less optimistic about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.
November's New Home Sales data is the second report, also coming at 10:00 AM ET. This report gives us a measurement of housing sector strength and mortgage credit demand. It is the sister report of last week’s Existing Home Sales report but covers a much smaller portion of the housing market. A weakening housing sector is considered good news for the bond market and mortgage rates because broader economic growth is less likely in the immediate future. Since bonds tend to thrive in weaker economic conditions, a large decline in sales would be considered favorable for bond prices and mortgage rates. Current forecasts are calling for an increase in sales of newly constructed homes. Ideally, we would like to see a large drop in sales.
As expected Friday, the government went into a partial shutdown when a spending bill could not be agreed upon in Washington DC. Because this is only a partial shutdown (most of the government is fully funded through September of next year), the impact on the markets should be minimal. With tomorrow and Tuesday generally considered holidays, Wednesday will be the first opportunity to truly see if the markets will react to the news. The most concerning issue is the fact that as of now, it appears this could be a long shutdown because of the differences between the different parties involved. My guess is that there will be little reaction this week, but that may change if there has been no progress as we roll into the new year.
Overall, there isn’t much set for this week that is likely to affect mortgage rates. We should see very light trading tomorrow with many traders home for the long holiday. Wednesday could be the most active day of the week for rates while tomorrow is the best candidate for calmest. The stock markets will be open until 1:00 PM ET tomorrow while the bond market will close at 2:00 PM ET. I am not expecting to see nearly as much movement in rates this week as we have the past couple. However, it is still possible to see changes, especially if stocks continue their extreme volatility. Therefore, keep an eye on the markets if still floating an interest rate and closing in the near future.