This week brings us the release of four economic reports that may influence mortgage rates in addition to two Treasury auctions that have the potential to do so also. The most important data comes later in the week and there is nothing of relevance set for tomorrow.
The week’s activities start late Tuesday morning with the release of September's Existing Home Sales data. This National Association of Realtor’s report will give us an indication of housing sector strength and mortgage credit demand by tracking home resales. It is expected to show a small increase in sales from August to September, meaning the housing sector was flat. That would be relatively bad news for the bond market since a strengthening housing sector makes broader economic growth more likely and bonds less appealing to investors. Ideally, it will show a sizable decline in sales that points toward a weakening housing sector.
Wednesday does not have any relevant economic data but does have the first of this week’s two Treasury auctions that have the potential to influence mortgage rates. 5-year Notes will be sold Wednesday followed by 7-year Notes Thursday. If these sales are met with a strong demand from investors, particularly the first, bond prices may rise during afternoon trading. This could lead to improvements in mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. But a lackluster investor interest may create selling in the broader bond market and lead to slight upward revisions to mortgage rates.
Durable Goods Orders data for September is Thursday's first monthly release, scheduled for 8:30 AM ET. It gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a 1.0% decline in new orders for products such as airplanes, appliances and electronics. If we see a large increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a larger decline should be good news for the bond market and mortgage rates, but this data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance in orders either way, likely will have little effect on Thursday's bond trading or mortgage pricing.
September's New Home Sales is Thursday’s second release, scheduled for 10:00 AM ET. This Commerce Department report covers the small percentage of home sales that Tuesday's Existing Home Sales report doesn't include. It is expected to show a small decline in sales of newly constructed homes, but I don't see this report having much of an impact on mortgage rates unless it shows a significant variance from forecasts.
The week's last report comes at 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it helps us measure consumer confidence, which is believed to indicate consumers' willingness to spend. Current forecasts show this index remaining nearly unchanged from its preliminary reading of 96.0. Good news for mortgage rates would be a sizable decline in the index, meaning consumers are likely to not spend as much in the near future.
Also worth noting is that corporate earnings season is in full swing. There are plenty of big-named companies releasing their quarterly and annual earnings reports this week. Strong earnings are good news for stocks and bad news for bonds. Generally speaking, if earnings are missing expectations, bonds should rally and mortgage rates should move lower. With plenty of them posting this week, stocks could have a heavy influence on bond trading and mortgage pricing.
Overall, Thursday is the best candidate for most important day of the week due to the Durable Goods report while Wednesday may be the calmest. There is nothing scheduled for tomorrow, but we may see the markets react to weekend Brexit news that appears to be more stock friendly than favorable for bonds. Even though we don’t have key economic data or relevant Fed events taking place, there still are enough variables in place that could make this a very active week for the markets and mortgage rates. Therefore, it would be prudent to keep an eye on the markets if still floating an interest rate and closing in the near future.