This week brings us the release of four monthly economic reports in addition to the minutes from the most recent FOMC meeting. All of the scheduled releases are considered to be moderately important, meaning we should see the markets and mortgage rates a bit calmer than we have the past couple weeks. It starts off light with nothing of importance set for tomorrow.
The week's calendar begins early Tuesday morning with the release of October's Housing Starts. This report gives us an indication of housing sector strength but usually does not have a noticeable impact on mortgage rates. I don't expect this month's version to be any different unless it varies greatly from analysts' forecasts. It is expected to show an increase in starts of new homes, meaning the new home portion of the housing sector strengthened a little last month.
Wednesday has no relevant economic data scheduled but does have the minutes from last month’s FOMC meeting. Traders will be looking for any indication of the Fed's next move regarding monetary policy from discussion of the participating members. The minutes will show what economic concerns members have that influenced their vote for a quarter point rate cut at this meeting. They will be released at 2:00 PM ET, therefore, any reaction will come during mid-afternoon trading. These minutes may lead to afternoon volatility Wednesday, or they may be a non-factor. Because they do carry the potential to influence mortgage rates, they should be watched.
Next up is October's Existing Home Sales data at 10:00 AM ET Thursday. The National Association of Realtors will give us this measurement of housing sector strength and mortgage credit demand by tracking home resales in the U.S. This report is expected to show a small rise in sales, meaning the housing sector strengthened slightly last month. That would be relatively bad news for the bond market and mortgage pricing because a stronger housing sector makes broader economic growth more likely. But unless it shows a significant surprise, it will likely not have a major impact on Thursday’s rates.
Also set for release late Thursday morning is the Leading Economic Indicators (LEI) report for October. This Conference Board release is a moderately important report that attempts to predict economic activity over the next three to six months. It is expected to show a 0.1% decline, meaning economic activity will likely slip over the next couple of months. Generally speaking, this would be good news for bonds. However, since this data is considered only moderately important, its results need to miss forecasts by a wide margin for it to affect mortgage rates.
The final report of the week will be the revised University of Michigan Index of Consumer Sentiment for November late Friday morning. Current forecasts are calling for little change from the 95.7 preliminary reading two weeks ago, meaning surveyed consumers felt nearly the same about their own financial and employment situations as they did earlier in the month. Bond traders would prefer to see a decline because waning confidence usually means consumers are less likely to make a large purchase in the near future, restricting economic growth. As long as we don't see a large upward move, the report will likely have a minimal impact on rates.
Overall, Thursday is the best candidate as most important day for rates while the calmest could be Tuesday. We saw a nice move lower in bond yields last week that led to improvements in mortgage pricing even though stocks rallied. The benchmark 10-year Treasury Note yield closed the week at 1.83%. If the trend continues in bonds and the 10-year breaks below 1.78%, we could see another leg lower in yields and mortgage rates. Until that level is broken though, it is prudent to watch the markets if still floating an interest rate and closing in the near future because failing to break below could mean an upward bounce in yields and rates are likely.