Happy Thanksgiving Week Everyone…
This holiday-shortened week brings us the release of six relevant economic reports for the markets to digest along with the last FOMC meeting’s minutes and two potentially important Treasury auctions. All of the week’s data is being posted over just two days, so the first part of the week should be interesting for mortgage shoppers.
There is no data or relevant events scheduled for tomorrow. Tuesday has two scheduled with the first being the revision to the 3rd Quarter Gross Domestic Product (GDP). It is expected to show an upward revision from last month’s preliminary reading of a 2.0% annual rate of expansion. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the best measurement of economic activity. Current forecasts call for a reading of approximately 2.4%, meaning that there was more economic growth during the third quarter than previously thought. This would be bad news for the bond market and mortgage rates, but a smaller than expected reading could improve mortgage rates.
October’s Existing Home Sales data will be posted late Tuesday morning. This report, along with Wednesday’s New Home Sales, are the least important reports of the week. They give us a measurement of housing sector strength and mortgage credit demand, but the bond market generally does not rely heavily on their results. The Existing Home Sales report is expected to show a decline in sales Tuesday, while the New Homes Sales report is predicted to show a small increase. Declines in these reports would be good news for the bond market and mortgage pricing, but unless they show significant surprises neither will likely have a significant impact on rates.
Also worth noting is the release of the minutes from the last FOMC meeting Tuesday afternoon. Traders will be looking for any indication of the Fed’s next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. This release is one of those that may cause some volatility in the markets after they are posted, or could be a total non-factor. If they show anything surprising, we may see some movement in rates Tuesday afternoon, but it is more likely there will be no reaction.
There are three reports scheduled for Wednesday morning in addition to the New Home Sales release. October’s Durable Goods Orders is the first and will be posted early morning. This data helps us measure manufacturing strength by tracking orders for big-ticket items, but is known to be quite volatile from month-to-month. It is expected to show a 0.3% decline in new orders. A larger than expected drop would be considered good news for the bond market and mortgage rates.
The second is October’s Personal Income and Outlays data. This data measures consumers’ ability to spend and their current spending habits. This is important because consumer spending makes up two-thirds of the U.S. economy. It is expected to show that income rose 0.4% and that spending increased 0.5%. Smaller than expected readings would mean consumers had less money to spend and were spending less than thought. That would be good news for bonds and could lead to improvements in mortgage rates.
The revised November reading to the University of Michigan Index of Consumer Sentiment will also be posted late Wednesday morning. It will give us a measurement of consumer willingness to spend. If confidence is rising, consumers are more apt to make a large purchase in the near future. Analysts are expecting to see little change to the preliminary reading of 69.3. Unless we see a significant variance from the forecasted reading, I don’t think this data will cause much movement in mortgage rates Wednesday.
In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Tuesday and 7-year Notes on Wednesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows often translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
The financial markets will be closed Thursday in observance of the Thanksgiving Day holiday. There will not be an early close Wednesday ahead of the holiday, but they will close early Friday and will reopen next Monday morning. I suspect that Friday will be a very light day in bond trading as many market participants will be home. Banks have to be open Friday, but we will likely see little change to mortgage rates that day.
Overall, I believe that we will see more volatility in the markets and mortgage rates the first couple days of the week. The most important day will probably be Wednesday, while the least important will be Friday. As we saw last week, the markets can get pretty active at anytime, so please be careful and maintain contact with your mortgage professional if you have not locked an interest rate yet.
If I were considering financing/refinancing a home, I would….
Lock if my closing was taking place within 7 days…
Float if my closing was taking place between 8 and 20 days…
Float if my closing was taking place between 21 and 60 days…
Float if my closing was taking place over 60 days from now…