This week has only three monthly economic reports set for release, with only one of them considered to be of high importance. In addition to that data, there are also a batch of congressional appearances from Fed Chairman Powell along with other Fed member speaking engagements and a couple of Treasury auctions midweek. The week starts off light with nothing of importance scheduled tomorrow.
Activities start late Tuesday morning when August's Existing Home Sales report is posted at 10:00 AM ET. The National Association of Realtors is expected to announce that the number of home resales in the U.S. rose moderately last month, indicating growth in the housing sector. A strengthening housing sector makes broader economic growth more possible, making bonds less appealing to investors. Therefore, bond traders would prefer to see a decline in sales. Since this report carries only a medium level of importance, it will take a noticeable variance from forecasts for it to directly influence rates.
Fed Chairman Powell and Treasury Secretary Mnuchin will speak before the House Financial Services Committee at 10:30 AM ET Tuesday as part of the Coronavirus Aid Act. The markets listen carefully anytime Chairman Powell speaks publicly, especially during congressional testimony. This event has the potential to be a market-mover, causing noticeable volatility in the financial and mortgage markets. He often releases his prepared statement before actually speaking, meaning we could see a market reaction earlier than 10:00 AM ET. This process will repeat itself Thursday morning when they appear before the Senate Banking Committee.
Wednesday morning’s only relevant event is another congressional appearance by Chairman Powell, this time before a House of Representatives subcommittee looking into the country’s response to the coronavirus earlier this year. This event appears to be more political than financial. However, the markets always listen when he is talking. It is not likely that we will see a major reaction to his appearance Wednesday, but the possibility does exist.
We also have the first of this week’s two potentially influential Treasury auctions taking place Wednesday. The Treasury will sell 5-year Notes that day and 7-year Notes Thursday. They will tell us if there is an appetite in the markets for medium-term securities. If investor demand in these sales is strong, particularly from international buyers, the broader bond market should move higher, pushing mortgage rates lower. But a lackluster interest from investors could lead to bond selling and higher mortgage pricing. The results of the sales will be announced at 1:00 PM ET each day, so any reaction will come during afternoon trading Wednesday and/or Thursday.
Besides weekly unemployment figures, Chairman Powell’s Senate testimony and the 7-year Note auction, we also will get August’s New Home Sales report Thursday. The Commerce Department is expected to say at 10:00 AM ET that sales of newly constructed homes rose last month, indicating the new home portion of the housing sector strengthened. This report will likely not have a noticeable impact on mortgage rates unless it differs greatly from forecasts. It is the week's least important report in terms of potential impact on mortgage rates, partly because it covers only the small portion of all homes sales that last week's Existing Home Sales report did not.
Friday closes the week with August's Durable Goods Orders at 8:30 AM ET, which is the week's most important report. It gives us an indication of manufacturing sector strength by tracking orders for big-ticket items at U.S. factories. Big-ticket products are items that are expected to last three or more years such as airplanes, electronics and appliances. Analysts are expecting to see a 1.2% rise in new orders, pointing towards strength in the manufacturing sector. A sizable decline should help boost bond prices and cause mortgage rates to drop Friday because signs of economic weakness make longer-term securities more appealing to investors. However, a much larger than expected increase in new orders will likely help push mortgage rates higher. It is worth noting that this data is known to be quite volatile from month-to-month, so a slight or moderate variance may not affect mortgage pricing like it may in other reports.
Overall, the most important day for the markets and mortgage rates appears to be Tuesday due to the first day of congressional testimony. We could also see noticeable movement Thursday, but the truth is any day this week may yield a change in rates. The best candidate for calmest day is tomorrow. Some of this week’s events are considered to be highly important to the markets. Accordingly, it would be prudent to watch the markets if closing in the near future and still floating an interest rate.