This holiday-shortened week brings us the release of only three pieces of monthly economic data that likely will affect mortgage rates. There also is a batch of Fed member speaking engagements and a couple of Treasury auctions that have the potential to influence the markets and mortgage pricing. The election results and related news could heavily influence stocks, causing bonds to react also. The first part of the week is light with no data scheduled to be posted until Thursday morning.
Activities begin Tuesday afternoon with the first of this week’s two fairly important Treasury auctions. 10-year Treasury Notes will be sold Tuesday while 30-year Bonds go Thursday, giving us an indication of demand for long-term securities. If the sales are met with a strong interest from investors, we should see the bond market move higher during afternoon trading Tuesday and/or Thursday. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds could cause upward revisions to mortgage rates. Tuesday's 10-year Note auction usually has the bigger impact on rates than the 30-year Bond sale.
The bond market will be closed Wednesday in observance of the Veteran's Day holiday, although the stock markets will be open for trading. If lenders are open for business, they probably will use Tuesday’s afternoon rates or not allow new locks until Thursday morning.
October's Consumer Price Index (CPI) will start this week's economic data early Thursday morning. The CPI measures inflationary pressures at the consumer level of the economy and is one of the most important reports the bond market sees each month. Inflation erodes the value of a bond’s future fixed interest payments, making them less appealing to investors today. If it reveals stronger than expected readings, indicating that inflationary pressures are rapidly rising at the consumer level, the bond market will probably react negatively and cause mortgage rates to move higher. Analysts are expecting to see a 0.2% increase in the overall reading and a 0.2% increase in the core data. The core reading is the more important of the two because it excludes more volatile food and energy prices. Weaker readings would be favorable news for mortgage rates.
Next up is the sister release to the CPI- the Producer Price Index (PPI) for October, at 8:30 AM ET Friday. It is similar to the CPI in tracking inflationary pressures but covers the producer level of the economy. There are also two portions of this index- the overall reading and the core reading. Both readings are expected to show a 0.2% rise from September's levels. As with the CPI, weaker than expected readings would be good news for bonds and mortgage rates while a larger than forecasted increase in the core reading could lead to higher mortgage rates Friday morning.
November's preliminary reading of the University of Michigan's Index of Consumer Sentiment will be posted late Friday morning. This index measures consumer confidence, which gives us an indication of consumer willingness to spend. It is expected to show a reading of 80.0, down a little from October's final reading of 81.8. That would be considered slightly favorable news for bonds because waning sentiment means consumers are less optimistic about their own financial situations and are less likely to make large purchases in the near future. With consumer spending making up over two-thirds of our economy, any related data is watched closely. The lower the reading, the better the news it is for mortgage shoppers.
Overall, Thursday is the best candidate for most important day of the week, but Friday may also bring a noticeable change in rates. Look for stocks to possibly take centerstage if they go into selling mode or extend their recent rally, especially the early days. It appears this will be another active week for the markets and mortgage rates. Therefore, please proceed cautiously if still floating an interest rate and closing in the near future.