This week brings us the release of six economic reports that may influence mortgage rates along with two Treasury auctions and a speaking engagement by Fed Chairman Powell. A couple of these reports certainly can cause a change in mortgage rates, but none are considered to be key releases. We have at least one event set for release each day except tomorrow, meaning it will probably be a moderately active week for mortgage rates.
The week starts Tuesday morning with May's New Home Sales report at 10:00 AM ET. This report helps us measure housing sector strength by tracking sales of newly constructed homes. It is the sister release to last week's Existing Home Sales report, but covers a much smaller portion of sales than that report does. It is expected to show a small rise in sales, although will likely not have much of an impact on mortgage rates because this data gives such a small snapshot of the housing sector. I believe it will take a large rise in sales or a sizable decline for this data to influence mortgage rates.
Fed Chairman Powell has a speaking engagement Tuesday afternoon that may be a major event or a non-factor. He will be speaking with a New York Times writer about the hurdles the economy is facing at 1:00 PM ET. Anytime the Fed Chair speaks, their words are watched closely. The topic is directly related to economic growth, so the likelihood of the markets reacting is elevated.
June's Consumer Confidence Index (CCI) will also be posted late Tuesday morning. This data is relevant to the financial markets because it measures consumer willingness to spend. If consumers are more confident about their own financial and employment situations, they are more apt to make large purchases in the near future, fueling economic growth. If it shows a sizable increase in confidence from last month, we can expect to see a negative reaction in bonds and mortgage rates. Current forecasts are calling for a reading of 132.0, down from last month's 134.1 reading. The lower the reading, the better the news it is for bonds and mortgage rates.
Wednesday has the week's most important release with May's Durable Goods Orders being posted at 8:30 AM ET. This Commerce Department report will give us an indication of manufacturing sector strength. It tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years such as electronics, appliances and airplanes. This data is known to be quite volatile from month to month and is expected to show a decline of 0.3% in new orders from April to May. A large decline would be the ideal scenario for the bond market and would hopefully lead to an improvement in mortgage pricing as it would indicate manufacturing sector weakness.
Also worth noting about Wednesday is the Fed will be selling debt this week that could affect mortgage rates. These sales may influence broader bond trading enough to affect mortgage rates if they show strong or weak investor demand. There are sales several days but the two most likely to have an impact on rates are Wednesday's 5-year Note sale and Thursday's 7-year Note auction. If they are met with a strong demand, we could see bond prices rise during afternoon trading. This could lead to afternoon improvements to mortgage rates also. On the other hand, if the sales draw a lackluster interest from investors, mortgage rates may move slightly higher during afternoon trading those days.
Thursday brings us the second revision to the 1st Quarter Gross Domestic Product (GDP). The GDP is the sum of all products and services produced in the U.S. and is considered to be the best measurement of economic growth or contraction. However, this particular data is quite aged now (covers January through March) and will likely have little impact on the bond market or mortgage pricing unless it varies greatly from previous readings. Market participants are looking more towards next month's release of the current quarter's initial GDP reading. Last month's first revision showed a 3.1% annual rate of growth. Thursday's update is expected to show the same. A larger increase in the GDP would be considered negative for rates as it means stronger economic activity.
Friday has the final two reports. May's Personal Income and Outlays data is scheduled for release at 8:30 AM ET. This report gives us an indication of consumer ability to spend and current spending activity. They are important because consumer spending makes up over two-thirds of the U.S. economy. If consumer income is rising, they have more money to spend each month. Analysts are expecting to see an increase of 0.3% in income and a 0.4% rise in the spending portion of the report. Smaller increases in both of these readings would be considered good news for the bond market and mortgage rates. This report also includes an important inflation reading that the Fed relies on during their FOMC meetings. It is expected to rise 0.1%, indicating inflation remains subdued, giving the Fed a green light to make a rate cut or two later this year.
The University of Michigan will close out this week's data when they update their Index of Consumer Sentiment for June late Friday morning. This index is another measure of consumer willingness to spend. A downward revision would be considered good news for bonds and rates. Forecasts are calling for little change from this month's preliminary reading of 97.9.
Overall, there is no clear candidate for most important day of the week. Friday is possible with two releases while Wednesday has the most important report. Tuesday’s economic data isn’t too concerning, but the afternoon conversation with Chairman Powell has the potential to be a heavy influence on the markets. The calmest day will probably be Thursday or maybe tomorrow, assuming something unexpected doesn’t happen. Besides the above mentioned events, we also need to be attentive to trade-related news that can have a big impact on the financial and mortgage markets. We will likely see rates move multiple days this week, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.