This week brings us the release of only three pieces of monthly economic data for the bond market to digest along with the minutes from the most recent FOMC meeting. Making things a little more interesting is the fact that all of the week's events take place over only two 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.
There is nothing of importance scheduled for Tuesday. The first event of the week will be the release of the minutes from last month’s FOMC meeting late Wednesday. Traders will be looking for any indication of the Fed's next move regarding monetary policy, particularly economic concerns and 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.
Thursday has all three of the week’s monthly economic reports. The first of the batch will be December’s Durable Goods Orders at 8:30 AM ET. This release was delayed during the partial government shutdown. It will give us a measurement of manufacturing sector strength by tracking new orders for big-ticket products such as airplanes, appliances and electronics. The data is known to be quite volatile from month to month, so a large headline number doesn’t have the same impact on the markets as other reports do. Thursday’s release is expected to show a 1.3% increase in new orders, indicating growth in the sector. A sizable decline would be good news for bonds and mortgage rates as it would point to weaker economic activity.
January's Existing Home Sales is next. The National Association of Realtors will release this data late Thursday morning. This data tracks home resales throughout the country, giving us an idea of housing sector strength. It is expected to show an increase in sales of existing homes, meaning the housing sector strengthened last month. The bond market would like to see a sizable decline in sales because weaker 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.
The final monthly report of the week will be January's Leading Economic Indicators (LEI) late Thursday morning. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning that economic activity should remain fairly flat in the near future. A decline 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.
Overall, Thursday is likely to be the most active day for mortgage rates with three economic reports set for release, including the Durable Goods Orders report that is considered to be of high importance. Any surprises in the FOMC minutes could cause Wednesday afternoon to become very active also. The calmest day will probably be Friday unless something unexpected takes place. I don’t believe we will see as much movement in the markets and mortgage pricing as we have seen the past few weeks.