Wednesday, October 27, 2021


Updated on October 27, 2021 10:03:16 AM EDT

September’s Durable Goods Orders report was posted at 8:30 AM ET this morning, revealing a 0.4% decline in new orders for big-ticket products at U.S. factories. This was stronger than the 0.8% decline that was expected, but since this data is known to be volatile from month to month, the variance was not as relevant as it would have been in other reports. Also, August’s increase was revised lower by 0.5% and a secondary reading for September that excludes more costly and volatile airplane related orders was a tad weaker than predicted. Overall, we can consider the report to be mixed or neutral for mortgage rates.

We also have the 5-year Treasury Note auction results to watch this afternoon. If they show a strong demand from investors, particularly international buyers, we could see bonds strengthen later today. At best, this will have a slight impact on rates. Results will be posted at 1:00 PM ET, making this an early afternoon event for mortgage rates. This process will be repeated tomorrow with 7-year Notes being sold.

Besides the 7-year Note auction, we also will get two pieces of economic data tomorrow. One of those releases, the initial reading of the 3rd Quarter Gross Domestic Product (GDP), is a major economic report. The 8:30 AM ET report is considered to be the benchmark measurement of economic growth because it is the total of all goods and services produced in the U.S. Accordingly, it is likely to have a big impact on the financial markets and mortgage pricing. There are three versions of this report, each a month apart. Tomorrow’s release is the first version and usually has the biggest influence on the markets. Current forecasts show the economy expanded at a 2.5% annual pace during the July through September months. If this report shows a noticeably smaller increase, I am expecting to see the bond market rally and mortgage rates fall further. However, a much larger than expected rise could lead to bond selling and an increase in mortgage pricing.

Tomorrow’s other economic data will be last week’s unemployment claims at 8:30 AM ET. They are expected to show 291,000 new claims for benefits were filed during the week, nearly unchanged from the previous week. Rising claims is a sign of employment sector weakness, so the higher the number tomorrow, the better it will be for mortgage rates. Keep in mind though, this is only a weekly report that will require a significant variance from forecasts to cause a noticeable move in rates.

 ©Mortgage Commentary 2021