This week has four moderately important economic reports set for release in addition to two Treasury auctions that are known to influence rates. We should see much less volatility in the bond and mortgage markets than we saw last week as none of these events are considered to be key to the markets.
The calendar starts tomorrow with September's Factory Orders data at 10:00 PM ET. This report is similar to the Durable Goods Orders release that came the week before last except it includes orders for both durable and non-durable goods. It is expected to show a 0.5% decline from August's level. A larger decline would be good news for the bond market and mortgage rates while an unexpected rise would could lead to slightly higher rates.
October’s Institute for Supply Management (ISM) non-manufacturing index will be posted late Tuesday morning. It is the sister release to Friday’s ISM manufacturing index, surveying executive sentiment of many other industries that are not considered to be manufacturing. The manufacturing index carries more significance than this version, but this version has been having a heavier influence on the markets recently than it used to. Therefore, it is on our calendar to watch. Forecasts show it rising from September’s reading, meaning more executives felt business improved in October than did in September. Good news for rates would be a decline.
3rd Quarter Productivity data will be released at 8:30 AM ET Wednesday. It is expected to show a 1.1% improvement in worker productivity during the quarter. A larger increase would be good news for the bond market because higher levels of employee productivity allow the economy to expand without inflationary pressures being a concern. This is a relatively low importance report, so it will take a significant variance from forecasts for it to directly affect mortgage rates.
We have two fairly important Treasury auctions Wednesday and Thursday. 10-year Treasury Notes will be sold Wednesday while 30-year Bonds go Thursday, giving us an indication of demand for long-term securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading Wednesday and/or Thursday. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds likely will cause upward revisions to mortgage rates. Wednesday's 10-year Note auction usually has the bigger impact on rates than 30-year Bonds.
Thursday is the only day of the week with nothing scheduled that may affect rates. November's preliminary reading of the University of Michigan's Index of Consumer Sentiment will be posted late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 96.0, up a little from October's final reading of 95.5. That would be considered slightly negative news for bonds because rising sentiment means consumers are more optimistic about their own financial situations and are more likely to make large purchases in the near future. With consumer spending making up over two-thirds of our economy, any related data is watched closely. The lower the reading, the better the news it is for mortgage shoppers.
Overall, no day stands out as the most important for rates. Thursday is likely to be the calmest, assuming there are no surprises or significant stock movement to drive bond trading. We may just see small or minor moves in rates multiple days. After the volatility of the past couple weeks, this may be welcomed news.