This week brings us the release of seven monthly and quarterly economic reports that may influence mortgage rates in addition to two Treasury auctions that have the potential to do so also. The most important data comes later in the week, but the other reports carry enough significance to change mortgage rates also. We can expect to see a fair amount of movement in the markets and mortgage pricing this week.
September's New Home Sales data will start this week’s activities at 10:00 AM ET tomorrow morning. This Commerce Department report covers the small percentage of home sales that last week's Existing Home Sales report didn't include. It is expected to show a small increase in sales of newly constructed homes, but I don't see this report having much of an impact on mortgage rates unless it shows a significant variance from forecasts.
Tuesday has two relevant reports scheduled, starting with Durable Goods Orders for September at 8:30 AM ET. It gives us a measurement of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. Analysts are currently calling for a 0.6% rise in new orders for products such as airplanes, appliances and electronics. If we see a larger increase in orders, mortgage rates will probably rise as bond prices fall. On the other hand, a decline should be good news for the bond market and mortgage rates. This data can be quite volatile from month to month and is difficult to forecast. Therefore, a small variance in orders either way, likely will have little effect on Tuesday's bond trading or mortgage pricing.
October's Consumer Confidence Index (CCI) will be posted at 10:00 AM ET Tuesday. This Conference Board index helps us gauge consumer willingness to spend. It is expected to show little change from last month's 101.8 reading. That would mean surveyed consumers were just as optimistic about their own financial and employment situations as they were last month. Good news for the bond market would be a noticeable decline because waning confidence usually translates to weaker consumer spending levels, which makes up over two-thirds of our economy. Current forecasts are showing a reading of 101.9. The lower the reading, the better the news it is for mortgage rates.
There is no important economic data that we need to be concerned about Wednesday, but it will bring us the first of the week's two Treasury auctions that have the potential to influence mortgage rates. 5-year Notes will be sold Wednesday followed by 7-year Notes Thursday. If these sales are met with a strong demand from investors, particularly Wednesday, bond prices may rise during afternoon trading. This could lead to improvements in mortgage rates shortly after the results of the sales are posted at 1:00 PM ET each day. A lackluster investor interest may create selling in the broader bond market and lead to slight upward revisions to mortgage rates.
A major piece of data is set to be posted early Thursday morning when the preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) is released at 8:30 AM ET. The GDP is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. Accordingly, it is likely to have a big impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Thursday's release is the first version and usually has the biggest influence on the markets. Current forecasts are calling for the GDP to have rebounded from the pandemic shutdown at an annual rate of 30% during the July through September months. If this report shows a much smaller increase, I am expecting to see the bond market rally and mortgage rates fall. However, a much larger than expected rise could lead to a rally in stocks, bond selling and a noticeable increase in mortgage pricing.
Friday has the remaining three reports, beginning with September's Personal Income and Outlays at 8:30 AM ET. This data gives us an indication of consumer ability to spend and current spending habits. There also is an inflation reading in the data that the Fed heavily relies on. It is important to the markets because consumer spending makes up such a large part of the U.S. economy. Rising income generally indicates that consumers have more money to spend, making economic growth more of a possibility. This is bad news for the bond market and mortgage rates because it raises inflation concerns that make long-term securities, such as mortgage-related bonds, less attractive to investors. Analysts are expecting to see a 0.3% increase in income and a 1.0% rise in spending. Smaller than expected increases in both readings would be good news for the bond market and mortgage pricing.
The 3rd Quarter Employment Cost Index (ECI) will also be released early Friday. This data tracks employer costs for salaries and benefits, giving us an indication of wage inflation pressures. Rapidly rising costs raises wage inflation concerns and may hurt bond prices. It is expected to show an increase in costs of 0.6%. A smaller than expected increase would be good news for mortgage rates, but this is not one of the more important reports of the week.
This week's last report comes at 10:00 AM ET Friday when the University of Michigan updates their Index of Consumer Sentiment for this month. This report is moderately important because it also helps us measure consumer confidence and willingness to spend. Current forecasts show this index remaining nearly unchanged from its preliminary reading posted two weeks ago. Good news for mortgage rates would be a sizable decline in the index, meaning consumers are likely to not spend as much in the near future.
Overall, Thursday is the best candidate for most important day of the week due to the initial GDP reading and weekly unemployment figures being released. The calmest day could be Wednesday with no data on the calendar. We also have to remember this is corporate earnings season, which can heavily influence stocks and also have an impact on mortgage rates. With so much on tap this week, expect to see multiple days with changes to mortgage rates. Don’t be surprised to see an intraday revision or two also. If still floating an interest rate and closing in the near future, it would be prudent to keep an eye on the markets as this week’s calendar is quite busy.