July 22nd, 2013
This week brings us only four pieces of economic data that have the potential to influence mortgage rates in addition to two Treasury auctions. We are also still in corporate earnings season, so any surprises in those releases could affect stock and bond trading, leading to changes in mortgage rates. There is mortgage rate-relevant data set to be posted four of the five days this week.
The National Association of Realtors will post June’s Existing Home Sales figures late Monday morning. This report gives us a measurement of housing sector strength and mortgage credit demand. Current forecasts are calling for a small increase in sales from May’s totals. A drop in sales would be considered good news for bonds and mortgage rates because a weakening housing sector makes broader economic growth more difficult. However, unless this data varies greatly from forecasts it probably will lead to only a minor change in mortgage rates.
Tuesday has nothing of importance scheduled that will likely influence mortgage rates. Wednesday’s sole economic report is June’s New Home Sales report at 10:00 AM ET. This Commerce Department report gives us another measurement of housing sector strength. Analysts are expecting it to show an increase in sales of newly constructed homes, indicating that the new home portion of the housing sector gained some strength last month. That would be considered negative news for bonds, but since this data tracks only a small percentage of all home sales it usually has little impact on the bond market and mortgage rates unless it varies greatly from forecasts. The Existing Home Sales report covers most of the home sales in the U.S.
The Commerce Department will post June’s Durable Goods Orders at 8:30 AM ET Thursday. Current forecasts are currently calling for an increase in new orders of 1.5% from May to June. This data gives us an indication 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. A much stronger than expected number may lead to higher mortgage rates Thursday morning because it would point towards economic strength. If it reveals a large decline in new orders, mortgage rates should drop Thursday morning. It should be noted though that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move the markets or mortgage rates.
The week’s final piece of data is the revised reading to July’s University of Michigan Index of Consumer Sentiment that will help us measure consumer optimism about their own financial situations. This data is considered relevant because rising consumer confidence usually translates into higher levels of spending, which adds fuel to the economic recovery and is looked at as bad news for bonds. Friday’s release is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate of 83.9, I think the markets will probably shrug this news off.
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 the auctions will be posted 1:00 PM ET each day. If investor interest is strong, we can expect the broader bond market to rally and mortgage rates to move lower. However, a lackluster demand could lead to bond selling and higher mortgage rates Wednesday and Thursday afternoons.
Overall, I am expecting a relatively active week in the financial and mortgage markets. I don’t see a particularly important day that can be labeled as the key day of the week, but that doesn’t mean we won’t see movement in rates multiple days. The most important report of the week is Thursday’s Durable Goods Orders, so we may see the most movement that day if the rest of the reports don’t show any significant surprises and the markets remain calm. Unless corporate earnings or something else fuels a rally or sell-off in stocks that drive bond trading, Tuesday appears to be the best candidate as the least important day of the week.