This holiday-shortened week brings us the release of only two monthly economic reports that are relevant to the bond market and mortgage rates but one of them is considered to be very important. In addition to the data, we also will get the minutes from this month’s FOMC meeting. The week begins light with nothing of importance set for release tomorrow.
The Conference Board will start this week’s activities when they post their Consumer Confidence Index (CCI) for December at 10:00 AM ET Tuesday. This is a moderately important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for a rise in confidence from November's reading of 125.5. Analysts are expecting Tuesday's release to show a reading of 128.0, meaning consumers felt more optimistic about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.
Tuesday also begins the holiday trading schedule. The stock markets will be open for a full day of trading, but the bond market will close at 2:00 PM ET Tuesday. All markets will be closed Wednesday for the New Year's holiday and will reopen for regular hours Thursday. Unlike last week though, we do have a couple of important events taking place after the holiday. That means more traders will be working than we saw after the Christmas holiday, which should translate into more volume in the markets towards the end of the week.
Thursday doesn’t have much to be concerned with. However, the Institute for Supply Management (ISM) will post their manufacturing index for December late Friday morning. This highly important index measures manufacturer sentiment. A reading below 50 means that more surveyed manufacturing executives felt that business worsened during the month than those who felt it had improved. That indicates a softening manufacturing sector rather than growth. Analysts are currently expecting to see a 48.7 reading in this month's release, meaning that sentiment strengthened this month since November's reading stood at 48.1. A smaller reading will be good news for the bond market and mortgage shoppers, while a higher than expected reading could lead to higher mortgage rates Friday morning as it would point towards a stronger manufacturing sector.
The minutes from this month’s FOMC meeting will be released Friday afternoon. They will give market participants insight to the Fed's thinking and concerns regarding the economy, inflation and monetary policy. It is one of those pieces of information that may cause a great deal of volatility in the markets or be a non-factor, depending on what they show. They will be released at 2:00 PM ET, so they won't affect the markets or mortgage rates until mid-afternoon hours. The last FOMC meeting was followed by revised Fed forecasts and a press conference by Fed Chair Powell, so the possibility of seeing something unexpected is minimal. Still, market participants will be looking for any tidbits about what the Fed may do next with interest rates and when the next move may be made.
Overall, Friday is the most important day of the week with the ISM index and FOMC minutes being released. The calmest day may be Thursday unless something unexpected happens. As we get past the holidays and the thin trading volume they bring, we will be able to put more faith in bond market moves. Until then, any noticeable move in bonds or mortgage rates will be suspect and likely not a sign of a trend upward or downward.