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This week brings us the release of six relevant economic reports for the
bond market to digest in addition to two potentially influential Treasury
auctions. Most of the reports are considered to be of moderate to fairly
high importance to the markets, so they do have the potential to affect
mortgage rates although I am expecting to see less volatility in the
financial and mortgage markets than we saw last week.
The first release of the week is September's Consumer Confidence Index
(CCI) late Tuesday morning. This Conference Board index will be posted at
10:00 AM ET and gives us a measurement of consumer willingness to spend.
It is expected to show a decline in confidence from last month's reading,
indicating that consumers were less optimistic about their own financial
situations than last month, therefore, less likely to make a large
purchase in the near future. This is good news for the bond market and
mortgage rates because consumer spending fuels economic growth. Analysts
are calling for a reading of approximately 80.0, down from August's 81.5
reading. The smaller the reading, the better the news it is for the bond
market and mortgage rates.
August's Durable Goods Orders is the week's most important data and will
be posted early Wednesday morning. This report 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 electronics and appliances. Analysts are
expecting to see a small increase of 0.4% in new orders, indicating minor
growth in the manufacturing sector. A sizable decline could help boost
bond prices and cause mortgage rates to drop Wednesday because signs of
economic weakness make longer-term securities more appealing to
investors. However, a sizable increase would indicate a stronger than
expected manufacturing sector and would 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 change may not affect
mortgage pricing.
August's New Home Sales will be released late Wednesday morning. The
Commerce Department is expected to say that sales of newly constructed
homes rose last month, indicating housing sector strength. This report
will likely not have a noticeable impact on mortgage rates unless its
readings differ greatly from forecasts. This 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.
The Treasury will sell 5-year Notes Wednesday and 7-year Notes Thursday,
which will tell us if there is an appetite 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 to the results will come
during afternoon trading Wednesday and Thursday.
Thursday morning has the final revision to the 2nd Quarter Gross Domestic
Product (GDP). Since this data is aged now and the preliminary reading of
the 3rd Quarter GDP will be released next month, I don't see this
revision having much of an impact on the financial markets or mortgage
pricing. The GDP is important because it is the total sum of all goods
and services produced within the U.S. and is considered the best
measurement of economic activity. It is expected to show no change from
the previous estimate of a 2.5% increase in the GDP. It will take a
fairly large revision for this data to move mortgage rates Thursday.
Friday has two reports scheduled that may influence mortgage rates. The
first is August's Personal Income and Outlays early Friday morning. It
gives us an indication of consumer ability to spend and current spending
habits. This is relevant to the markets because consumer spending makes
up over two-thirds 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 negative news for the bond market and mortgage rates
because it raises inflation and economic growth concerns, making
long-term securities such as mortgage-related bonds less attractive to
investors. It is expected to show an increase of 0.4% in income and a
0.2% increase in spending. If we see weaker than expected readings, the
bond market should react positively, leading to lower rates Friday.
The second report of the day is the University of Michigan's revised
Index of Consumer Sentiment for September. The preliminary reading that
was released earlier this month showed a 76.8 reading. Analysts are
expecting to see a small upward revision, meaning consumer confidence was
slightly stronger than previously thought. As with Tuesday's CCI release,
a lower than expected reading would be good news for bonds and should
help improve mortgage rates.
Overall, I don’t see an obvious choice for most important day of the week
but Wednesday does have two economic reports scheduled including the most
important of the six. So, let’s label it as likely to be most active
although Friday does have two reports scheduled also. The least important
day will probably be tomorrow with nothing of relevance scheduled. I
suspect we will see changes in mortgage rates multiple days this week,
but in small increments rather than sizable moves.
If I were considering financing/refinancing a home, I would.... Lock if
my closing was taking place within 7 days... Lock if my closing was
taking place between 8 and 20 days... Lock if my closing was taking place
between 21 and 60 days... Float if my closing was taking place over 60
days from now...
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