Monday’s bond market has opened the week in negative territory. Stocks are showing minor gains with the Dow up 17 points and the Nasdaq up 26 points. The bond market is currently down 4/32 (2.32%), but I don’t believe is enough to cause much of a change in this morning’s mortgage rates if comparing to Friday’s morning levels.
There is nothing scheduled for release today that is relevant to mortgage rates. However, there are six reports and two Treasury auctions scheduled over the remainder of this holiday-shortened week. And all of the week’s data is being posted over only two days, partly due to the Thanksgiving holiday.
Tomorrow morning kicks off the week’s activities with the first revision to the 3rd Quarter Gross Domestic Product (GDP) at 8:30 AM ET. It is expected to show a small downward revision from last month’s preliminary reading of a 3.5% annual rate of growth. The GDP measures the total of all goods and services produced in the U.S. and is considered to be the benchmark measurement of economic growth. Current forecasts call for a reading of approximately 3.3%, meaning that there was a little less economic activity during the third quarter than previously thought. This would be good news for the bond market and mortgage rates because strengthening economic growth hurts bond prices and mortgage rates.
November’s Consumer Confidence Index (CCI) will be released by the Conference Board at 10:00 AM ET tomorrow morning, giving us a measurement of consumer willingness to spend. If consumers are gaining confidence in their own financial and employment situations, analysts believe that they are more apt to make a large purchase in the near future, fueling economic growth. This is important because consumer spending makes up over two-thirds of the U.S. economy and rapid economic growth makes long-term securities such as mortgage-related bonds less attractive to investors. Analysts are expecting to see an increase in confidence from last month’s level, meaning surveyed consumers were more optimistic about their own financial situations this month than they were last month. A weaker reading than the 96.0 that is expected would be good news for mortgage rates, while a stronger reading could push mortgage rates higher tomorrow.
In addition to the two economic reports, tomorrow also has the first of two relatively important Treasury auctions that have the potential to influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Treasury Notes tomorrow 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 investor demand usually makes bonds more attractive to investors and brings more funds into the bond market. 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.
Overall, I am expecting Wednesday to be the busiest day for the bond market and mortgage rates with four of the week’s reports scheduled, but tomorrow is likely to be pretty active also. The financial markets will be closed Thursday for the Thanksgiving holiday and will be open Friday but close early. Friday will likely be the calmest day of the week as many traders will be home for the long weekend rather than in the office working.