This week brings us the release of only three monthly economic reports for the markets to digest. None of the reports are considered to be highly important to mortgage rates, but we do have another FOMC meeting mid-week that may cause some volatility. The week starts off slow with nothing of importance set for tomorrow.
The week's calendar kicks off Tuesday with the release of January's Factory Orders report at 10:00 AM ET. This report will give us a measurement of manufacturing sector strength by tracking new orders at U.S. factories for both durable and non-durable goods. Current forecasts are calling for an increase of 0.2% in new orders. A decline would be good news for the bond market and could lead to an improvement in mortgage rates since it would point towards economic weakness. However, it usually takes a large variance from forecasts for this report to affect mortgage rates noticeably because a significant portion of this data was already posted in last week's Durable Goods Orders release.
Wednesday has no important data but has several Fed events scheduled. They start with the 2:00 PM ET adjournment of the two-day FOMC meeting that begins Tuesday. There is a pretty wide consensus that Fed Chairman Jerome Powell and friends will leave key short-term rates unchanged at this meeting. Since the non-move won't come as a surprise, market participants will be focused on the Fed's timetable for future rate hikes. If the post-meeting statement gives any hints of a rate hike coming soon, expect the bond market to react negatively and mortgage rates to spike higher. Reassurances from them that current economic conditions call for a patient approach and no timetable is set for the next rate hike, we should see bonds and mortgage rates improve.
The FOMC meeting will adjourn at 2:00 PM ET, which is when the statement will be released. That is also when we will get the Fed's updated economic projections. Those events will be followed by a press conference with Chairman Powell at 2:30 PM. It is likely going to be a pretty active afternoon in the financial and mortgage markets, especially if the meeting yields any surprises.
Thursday's monthly report is Leading Economic Indicators (LEI) for February from the Conference Board. This index attempts to measure economic activity over the next three to six months. It is considered to be moderately important, but likely will not have a significant impact on mortgage rates. Current forecasts are calling for a 0.2% increase, meaning it is predicting that economic activity will likely expand slightly in the coming months. A smaller than forecasted rise, or better yet a decline would be considered good news for the bond market and mortgage rates.
February's Existing Home Sales report will be posted by the National Association of Realtors late Friday morning. It will give us a measurement of housing sector strength and mortgage credit demand. It is expected to reveal an increase in home resales, meaning the housing sector strengthened last month. Bond traders would prefer to see a large decline in sales, pointing towards a rapidly weakening housing sector. Bad news would be a sizable increase in sales, indicating that the housing sector is gaining momentum. That could be troublesome for the bond market and mortgage rates because housing strength makes broader economic growth more likely.
Overall, Wednesday is the most important day of the week due to the FOMC activities. There are no other key events this week, so we should see the most movement in rates mid-week. The calmest day could be Tuesday. I don’t believe we will see an overly active week for rates, but the potential is there. The benchmark 10-year Treasury Note yield is at its lowest level since early January (2.59%). Before then, we have to go back to January of last year to find this level. There appears to be more room for yields to fall, assuming we don’t get significantly unfavorable news in the immediate future. That would be good news for mortgage shoppers since rates tend to track bond yields. However, please proceed cautiously if still floating an interest rate and closing soon as market momentum can swing without notice.