This week brings us the release of only three relevant monthly economic reports, none of which are considered to be highly important. What may influence rates more than any of the economic data is congressional testimony from Fed Chairman Powell and/or the minutes from last month’s FOMC meeting. There is nothing of importance set for tomorrow, but Chairman Powell’s appearance on 60 Minutes this evening could drive trading as the new week begins. At this moment, it looks as if stocks will open with gains tomorrow while bonds are fairly flat. Things certainly can change overnight though.
April's Housing Starts will begin this week’s calendar early Tuesday morning. This data gives us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show a large decline in new construction starts and permits, revealing housing sector weakness. This report is normally not considered to be of high importance to the bond market, meaning it likely will have little impact on mortgage rates regardless of what is reveals.
Fed Chairman Powell and Treasury Secretary Mnuchin will appear before a Senate committee Tuesday morning as part of the CARES Act requirements. They will be updating Senate members on the status of the economy, what is being done to support it and what they expect to happen in the near future. All eyes will be on their testimony. We can expect to see the markets move during this hearing. Most of the time, Chairman Powell’s prepared statement is released before he actually appears in these types of hearings. Therefore, we can expect the markets to react when they are made available and then again during the Q&A portion of the proceedings also. This has the potential to be a significant event for the financial and mortgage markets.
Wednesday’s only relevant events come during afternoon hours. The first is the results of the inaugural 20-year Treasury Bond auction at 1:00 PM ET. This is the first time 20-year bonds are being sold by the government since 1986. It is part of the needed funding for the massive stimulus programs that were made to help offset the impact of the coronavirus. As with the other regular Treasury auctions, a strong demand from investors could lead to lower bond yields and a slight improvement to mortgage pricing Wednesday afternoon.
The second event of the day will be the minutes from the last FOMC meeting. Market participants will be looking for how Fed members feel about the economy during the pandemic and what further actions they may take to help support it. Because of recent public speaking engagements and such, we likely are not going to see too much in the minutes that we don’t already know. They will be released at 2:00 PM ET, so if there is a reaction, it will come during midafternoon trading Wednesday.
Thursday has two monthly economic releases in addition to the weekly unemployment update. The first monthly release comes from the National Association of Realtors, who will give us their Existing Home Sales report for April at 10:00 AM ET. This data will give us a measurement of housing sector strength by tracking resales of existing homes in the U.S. This type of data is relevant because a weakening housing sector makes broader economic growth less likely. Current forecasts are calling for a large decline in sales last month due to the pandemic. A smaller than expected drop could lead to bond weakness and a slight increase in mortgage rates Thursday morning.
Also late Thursday morning will be the release of April's Leading Economic Indicators (LEI). This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 5.5% decline from March's reading, meaning that the indicators are predicting economic activity is likely to slow drastically. This would be no surprise since the country is still in different forms of a shutdown.
Overall, Tuesday is likely to be the most active day for rates, but Wednesday afternoon may bring noticeable movement also. The calmest day could be Friday with nothing of importance scheduled for release and an early close for the bond market ahead of the Memorial Day holiday next Monday. Despite a small number of economic releases, we should still see plenty of movement in rates this week. Accordingly, keep an eye on the markets if still floating an interest rate and closing in the near future.