February 6th, 2017
This week has only a single monthly report set for release that is expected to influence mortgage rates in addition to a couple of Treasury auctions. With such a short list of events to affect bond trading, we should see stocks have a larger impact this week than they recently have. It is also fairly safe to say that politics could come into play.
There is nothing set to take place Monday or Tuesday. The first scheduled event of the week will be the first of the two important Treasury auctions. 10-year Treasury Notes will be sold Wednesday, followed by 30-year Bonds Thursday. Wednesday's auction is the more important of the two as it will give us an indication for demand of mortgage-related securities. If the sales are met with a strong demand from investors, we should see the bond market move higher during afternoon trading the days of the auctions. But a lackluster interest from buyers, particularly international investors, would indicate a waning appetite for longer-term U.S. securities and lead to broader bond selling. The selling in bonds would result in upward afternoon revisions to mortgage rates.
February’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment is the sole monthly report of the week, coming late Friday morning. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. If it shows an increase in consumer confidence, the stock markets may move higher and bond prices could fall. It is currently expected to show a 98.0 reading, down from January’s final reading of 98.5. That would indicate consumers were a little less optimistic about their own financial situations than last month and are less likely to make large a purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, this would be considered slightly positive news for bonds and mortgage pricing. Ideally, we would prefer to see a large decline in confidence.
Overall, Wednesday is the best candidate for most active day for rates while any other day could be the quietest. Look for stocks to be in focus this week. Of particular interest will be the Dow's ability to stay above 20,000. Weaker stocks is generally good news for bonds and mortgage rates. If it fails to hold, there is an elevated likelihood that stocks will slide noticeably, driving bond prices higher and mortgage rates lower. Despite the lack of influential economic data, it still would be prudent to maintain contact with your mortgage professional if floating an interest rate and closing in the near future.