• This holiday-shortened week has only three relevant monthly or quarterly economic reports set for release in addition to a couple of Treasury auctions and the weekly unemployment update.
• Several of this week’s releases are somewhat old news now because the government shutdown pushed back their release almost two months, but two carry enough importance to cause a change to mortgage pricing if they show surprises.
• All of the data comes over just two days due to the Christmas holiday with nothing set for tomorrow or Friday.
• The week's first piece of data will come at 8:30 AM ET Tuesday morning when the shutdown-delayed preliminary reading of the 3rd Quarter Gross Domestic Product (GDP) will be released. Current forecasts show the economy expanded at a 3.2% annual pace during the quarter. If we get a noticeably smaller rate of growth, the bond market should rally and mortgage rates will fall. However, bond traders are probably much more interested in the current quarter’s activity that is expected to be released next month than data from July through September.
• Also early Tuesday morning will be the release of October’s Durable Goods Orders report that gives us a measurement of manufacturing sector strength. This shutdown-delayed report tracks new orders for big-ticket products with an expected life span of at least three years, such as appliances, airplanes and electronics. Analysts are expecting to see a 0.4% increase in new orders, pointing to modest growth in manufacturing.
• Tuesday’s third economic release will be the Fed’s Industrial Production report at 9:15 AM ET. This update will be a combination report that covers both October and November. It tracks output at U.S. factories, mines and utilities, giving us a sign of manufacturing strength, but isn’t considered to be one of the more important reports each month. Favorable news for mortgage rates would be a decline in production.
• There are two relatively important Treasury auctions this week that may influence bond trading enough to affect mortgage rates slightly. First will be an auction of 5-year Treasury Notes Tuesday followed by 7-year Notes Wednesday. If the sales go poorly, meaning investor demand was soft, we could see broader selling in the bond market that leads to upward revisions in mortgage rates. Results will be posted at 1:00 PM ET each auction day. If there is a reaction to the sales, it should be minor and come shortly after those results are posted.
• The only other relevant economic data coming this week will be Wednesday morning's weekly unemployment update.
• Wednesday has shortened trading ahead of the Christmas Day holiday. The bond market will close at 2:00 PM ET that day while stocks will trade until 1:00 PM. The markets will be closed Thursday then will reopen for regular trading Friday morning.
• We will likely see light trading Wednesday and Friday as many bond trading firms will be working on a skeleton staff as traders make an extended holiday weekend. When there is thin trading in the market, moves are exaggerated by the light volume and will be corrected when regular volume returns next Monday.
• Overall, Tuesday is clearly the most important day for mortgage rates this week. The calmest day will probably be Friday since there is no relevant data and many traders will be out of the office.
• We still could see a noticeable move in rates if Tuesday’s data shows some big surprises. Therefore, please keep an eye on the markets if still floating an interest rate and closing in the near future.
• Visit our Daily Commentary page on our site for detailed explanations on current news that is relevant to mortgage rates.
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