This week brings us the release of five relevant economic releases for the bond market to watch in addition to two relatively important Treasury auctions. There is no relevant data or news expected to be released tomorrow, so look for the stock markets to heavily influence bond trading and mortgage rates until we get to the factual economic reports.
July’s Existing Home Sales will open the week’s data late Tuesday morning. The National Association of Realtors will release this report, giving us a measurement of housing sector strength. It covers approximately 85% of home sales in the U.S., but usually does not have a major influence on bond trading and mortgage rates unless it varies greatly from analysts’ forecasts. It is expected to show a decline from June’s sales, meaning the housing sector is still softening. This would be good news for the bond market and mortgage rates because a weak housing sector makes a broader economic recovery difficult.
The Commerce Department will post July’s Durable Goods Orders early Wednesday morning, giving us an important measure of manufacturing sector strength. This data tracks orders at U.S. factories for big-ticket items, or products that are expected to last three or more years. A much weaker reading than the expected 0.5% rise that is expected would indicate that the manufacturing sector is not as strong as thought. This would be good news for bonds and should lead to lower mortgage rates Wednesday morning.
Also scheduled for release Wednesday is July’s New Home Sales data. This report is the least important release of the week. It will give us another indication of housing sector strength and mortgage credit demand, but only tracks approximately 15% of all home sales. It usually doesn’t have a major impact on bond prices or mortgage rates unless it varies greatly from forecasts.
Friday is another multi-release day with the first revision to the 2nd Quarter Gross Domestic Product (GDP) and the University of Michigan Index of Consumer Sentiment both scheduled for release. The GDP is the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. This reading is the second of three that we see each quarter. Last month’s preliminary reading revealed that the economy grew at an annual rate of 2.4%. Friday’s revision is expected to show that the GDP actually rose only 1.4%. A larger than expected downward revision should help lower mortgage rates Friday, especially if the inflation portion of the release does not get revised higher. There will be a final revision issued next month, but it probably will have little impact on mortgage rates.
August’s revision to the University of Michigan’s Index of Consumer Sentiment is also due Friday morning. It helps us track consumer willingness to spend and is expected to show little change from August’s preliminary reading of 69.6. If it revises lower, consumers were less confident about their personal financial situations than previously thought. This would be good news for the bond market and mortgage rates because waning confidence usually means that consumers are less likely to make large purchases in the near future.
Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are Wednesday’s 5-year Note and Thursday’s 7-year Note sales. Results of this week’s auctions will be posted 1:00 PM ET each day. If investor interest is strong in the auctions, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons.
Overall, we will likely see the most activity in rates Tuesday morning, but Wednesday and Thursday are also fairly important. If we manage to get weaker than expected results in the key reports and the auctions go well, we should see mortgage rates close the week lower than tomorrow’s opening levels. But stronger than expected results in the economic reports and disappointing results in the Treasury sales will most likely lead to rates moving higher this week.
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…
bc@smarterborrowing.com 617.771.5021
bc@smarterborrowing.com
617.771.5021
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