Updated on July 26, 2021 10:03:55 AM EDT
Today’s economic release was June’s New Home Sales report at 10:00 AM ET. The Commerce Department announced a 6.6% decline in sales of newly constructed homes. This was well off from forecasts, indicating the new home portion of the housing sector was much weaker than many had thought. Unfortunately, this report covers such a small portion of the housing sector, preventing a more noticeable reaction in this morning’s rates.
The rest of the week has plenty scheduled that is likely to influence mortgage rates. We have six monthly and quarterly economic releases to be concerned with, in addition to a couple of Treasury auctions, another FOMC meeting and more corporate earnings announcements. With so much scheduled, and some of it highly important to the markets, it is safe to assume that it will be an active week for rates.
Junes Durable Goods Orders report will be the week’s first highly important event when it is posted at 8:30 AM ET tomorrow. Current forecasts are calling for an increase in new orders of 2.1% 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 rise may lead to higher mortgage rates tomorrow morning because it would be a sign of economic strength. Worth noting though, this data is known to be extremely volatile from month to month, so a moderate difference between forecasts and the actual reading may not move the markets or mortgage rates like it would if coming in other reports.
Late tomorrow morning, the Conference Board will release their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment, giving us an idea of consumer willingness to spend. If consumers are more confident in their own financial and employment situations, they are more apt to make large purchases in the near future. This is important because consumer spending makes up such a large portion of our economy. If the CCI reading is weaker than expected, meaning consumers were less confident than analysts thought and likely will delay making a large personal purchase, we may see bond prices rise and mortgage rates drop tomorrow. Current forecasts are calling for a reading of 124.5, which would be a decline from Junes 127.3. The lower the reading, the better the news it is for mortgage rates.
Tomorrow also has the first of this week’s two potentially influential Treasury auctions. 5-year Notes will be sold tomorrow, followed by Thursdays 7-year Note auction. 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 bonds that leads to upward revisions to mortgage rates. On the other hand, strong investor demand in the sales usually makes bonds more attractive to investors, bringing more funds into the bond market. The buying of bonds during this process translates into lower yields and a downward move in mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during early afternoon hours tomorrow and/or Thursday.
Overall, the most important day for mortgage rates is Wednesday, but Thursday also has the potential to be it due to the importance of the GDP readings. Throw in a surprise corporate earnings announcement or two with this weeks calendar and we have the makings of a possibly volatile week for the markets and mortgage rates. If still floating an interest rate and closing in the near future, it would be prudent to pay attention to market movement and some of the key events that are scheduled as we may see noticeable moves in rates throughout the week.
©Mortgage Commentary 2021