This week brings us six economic reports to watch along with two potentially relevant Treasury auctions. None are considered to be key reports, but several carry enough significance to alter mortgage rates if they show any surprises. Tomorrow is the only day of the week with nothing of importance scheduled. After last week’s huge bond rally, it should not be a surprise to see some short-term pressure in bonds as the week starts. Once we get to the more important data later in the week, we can expect the reports to be more of a factor in the markets.
Tuesday has the first report of the week with February's Housing Starts data at 8:30 AM ET. This report tracks construction starts of new housing and doesn't usually cause much movement in mortgage rates. It is considered one of the least important reports we see each month but is expected to show a decline in new starts, indicating softness in the housing sector. Good news for the bond market and mortgage rates would be a sizable decline in new starts. However, unless we see a large variance from forecasts the data likely will not lead to a noticeable move in mortgage pricing.
March's Consumer Confidence Index (CCI) from the New York-based Conference Board at 10:00 AM ET Tuesday is next. This index gives us an indication of consumers' willingness to spend. Bond traders watch this data closely because consumer spending makes up over two-thirds of our economy. If this report shows that consumer confidence in their own financial situation is falling, it would indicate that consumers are less apt to make a large purchase in the near future. If it reveals that confidence looks to be growing, we may see bond traders sell as economic growth may rise, pushing mortgage rates higher Tuesday morning. It is expected to show a reading of 132.0 up from February's 131.4 reading. The lower the reading, the better the news it is for bonds and mortgage rates.
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 Notes Wednesday and 7-year Notes on Thursday. 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 to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more 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 auction day, so look for any reaction to come during afternoon hours.
The second and final revision to the 4th Quarter GDP will be released at 8:30 AM ET Thursday. The Gross Domestic Product is the total of all goods and services produced in the U.S. and is the benchmark measurement of economic activity. It is expected to show that the economy grew at an annual pace of 2.5% last quarter, down slightly from the previous estimate of 2.6% that was released last month. Analysts are now more concerned with next month's preliminary reading of the 1st quarter than data from three to six months ago. So, unless we see a significant revision, this report probably will have little impact on Thursday's mortgage rates.
The Personal Income and Outlays report is the first of three reports set for Friday morning. This data helps us measure consumers' ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending-related information has on the financial markets. If a consumers' income is rising, they are more likely to make additional purchases in the near future. Therefore, weaker than expected readings would be good news for bonds and mortgage rates. What we will get in this release is February’s income and January’s spending reading along with the important inflation index within it (PCE). This data is still partially delayed form the government shutdown. Analysts are currently calling for a 0.3% rise in February’s income and a 0.3% increase in January’s spending. The weaker the readings, the better the news it will be for mortgage rates.
Friday's second report comes from the University of Michigan at 10:00 AM ET. Their revised March Consumer Sentiment Index will give us another indication of consumer confidence, which hints at consumers' willingness to spend. Rising confidence is considered bad news for the bond market and mortgage pricing because it usually means consumers are more willing to spend. Friday's report is expected to show a reading of 97.8, unchanged from the preliminary reading posted two weeks ago. Favorable results for bonds and mortgage rates would be a sizable decline in confidence.
The week's calendar closes with February's New Home Sales figures at 10:00 AM ET Friday. The Commerce Department is expected to announce an increase in sales of newly constructed homes. This report tracks a much smaller percentage of home sales than last week's Existing Home Sales report covers, so it should not have much of an influence on the markets and mortgage pricing. A large increase in sales would be negative for the bond market and mortgage pricing because it would point towards economic strength.
Overall, Friday is the most important day of the week with three reports scheduled. However, as we saw last week, the markets can get volatile at any time. Stocks will also help dictate bond direction this week. If stocks extend Friday’s big sell-off that pushed the Dow lower by 460 points, bonds and mortgage rates may start the week with further improvements. Bonds did give back a bit of Friday’s early strength before closing, meaning unless we see a noticeable move in bonds tomorrow, we should see a slight increase in rates. This could be the start of a very active and volatile period for the markets. Therefore, please maintain contact with your mortgage professional if closing in the near future and still floating an interest rate.