This week brings us the release of four important economic reports in addition to two Treasury auctions that may influence rates. Only one of the reports is considered to be of fairly high importance to the bond market and mortgage pricing.
The remaining reports are considered to be of moderate or low importance and will likely not heavily influence mortgage rates. There is nothing of importance scheduled for release tomorrow, so expect the stock markets to influence bond trading and mortgage pricing.
The National Association of Realtors will give us their Existing Home Sales report late Tuesday morning. This data tracks resales of homes in the U.S. during April, giving us a measurement of housing sector strength. This type of data is relevant because a weakening housing sector makes a broader economic recovery less likely. Current forecasts are calling for an increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating further housing sector weakness. A large increase in sales could lead to bond weakness and a small increase in mortgage rates Tuesday morning.
April’s New Home Sales report is the sister report of the Existing Home Sales and will be released late Wednesday morning. It gives us a similar measurement of housing sector strength and future mortgage credit demand, but tracks a much smaller portion of housing sales than Tuesday’s report does. Actually, it is the least important release of the week and probably will not have much of an impact on mortgage pricing. It is expected to show gains in sales from March’s level, meaning the new home portion of the housing sector also strengthened last month.
Thursday has the week’s most important report with April’s Durable Goods Orders being posted. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years. It is currently expected to show an increase in new orders of approximately 0.3%, indicating the manufacturing sector remained fairly flat last month. That would be relatively good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts would likely have little impact on Thursday’s mortgage rates.
The last relevant data of the week will come from the University of Michigan, who will update their Index of Consumer Sentiment for May late Friday morning. This type of data is watched closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, rising confidence and the higher levels of spending that usually follow, are considered negative news for bonds and mortgage rates. Friday’s report is expected to show a small decline from this month’s preliminary reading of 77.8. A reading above 77.5 would be considered negative for bonds and mortgage pricing.
Overall, I think we have a moderately busy week ahead of us. The big report of the week is the Durable Goods Orders, making Thursday the best candidate for most active day for mortgage rates. Tuesday’s housing report may also cause movement in rates if it shows a sizable variance from forecasts. There are also a couple of Treasury auctions that are worth noting. The 5-year Note sale is Wednesday and the 7-year Note auction will be held Thursday. Both may also influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors.
Also worth noting is the fact that the bond market will close early Friday afternoon ahead of next Monday’s Memorial Day holiday. With all this, there is a pretty good possibility of seeing mortgage rates change several times this week- especially if there is more volatility in the stock markets. Accordingly, please proceed extremely cautiously if still floating an interest rate.