Updated on February 20, 2019 10:17:26 AM EST
This morning has no relevant economic data for the markets to digest, but we do have the afternoon release of last month’s FOMC meeting minutes to watch. They will be released at 2:00 PM ET, so if there is a reaction to them it will come during mid-afternoon trading. Market participants will be looking for insight into the Fed’s thought process on economic growth, potential hurdles, inflation and expected monetary policy moves. If there are growing concerns about the strength of our economy and the need for further hikes to key short-term interest rates, the bond market should respond favorably. We have also recently heard discussion on the unwinding process of the Fed’s balance sheet that swelled during the economic stimulus days. It will be interesting to see if the Fed is considering making significant changes to that process. Any action that slows the process of shedding holdings should also be taken as favorable news for bonds and mortgage rates.
Along with the weekly unemployment update, we will get three pieces of economic data tomorrow morning that have the potential to influence mortgage rates. The first of the batch will be December’s Durable Goods Orders at 8:30 AM ET. This release was delayed during the partial government shutdown. It will give us a measurement of manufacturing sector strength by tracking new orders for big-ticket products such as airplanes, appliances and electronics. The data is known to be quite volatile from month to month, so a large headline number doesn’t have the same impact on the markets as other reports do. Thursday’s release is expected to show a 1.3% increase in new orders, indicating growth in the sector. A sizable decline would be good news for bonds and mortgage rates as it would point to weaker economic activity.
Januarys Existing Home Sales is next, coming at 10:00 AM ET. The National Association of Realtors will release this data that tracks home resales throughout the country, giving us an idea of housing sector strength. It is expected to show an increase in sales of existing homes, meaning the housing sector strengthened last month. The bond market would like to see a sizable decline in sales because weaker housing makes broader economic growth more difficult. Since long-term securities such as mortgage bonds tend to thrive during weaker economic conditions, weak housing numbers would be good news for mortgage rates.
The final monthly report of the week will be Januarys Leading Economic Indicators (LEI), also at 10:00 AM ET. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.1% increase, meaning that economic activity should remain fairly flat in the near future. A decline would be good news for the bond market and mortgage rates. Although, this data is not considered to be highly important so a sizable variance from forecasts is needed for it to directly affect mortgage rates.
©Mortgage Commentary 2019