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This Week's Mortgage Commentary

December 28th, 2015

market chart on blue backgroundWeek two of the year-end holiday season has only one monthly economic report scheduled for release that is relevant to mortgage rates in addition to a couple of potentially influential Treasury auctions. There is nothing of importance Monday, but we still may see some movement in the markets and mortgage pricing as traders return from the extended holiday weekend.

The Conference Board will post their Consumer Confidence Index (CCI) for December late Tuesday morning. This is a fairly important release because it measures consumer willingness to spend. If consumers are more confident about their personal financial and employment situations, they are more apt to make a large purchase in the near future. Since consumer spending makes up over two-thirds of the U.S. economy, any related data is watched closely by market participants and can affect mortgage rate direction. Current forecasts are calling for an increase in confidence from November’s reading of 90.4. Analysts are expecting Tuesday’s release to show a reading of 93.5, meaning consumers felt much better about their own financial situation than they did in November. The lower the reading, the better the news it is for bonds and mortgage pricing.

We also have Treasury auctions scheduled the first three days of the week. The two that are most likely to influence mortgage rates are Tuesday’s 5-year and Wednesday’s 7-year Note sales. If those sales are met with a strong demand, bond prices may rise enough to lead to improvements in mortgage rates shortly after the results are posted. But a lackluster investor demand may create bond selling and upward revisions to mortgage rates Tuesday and/or Wednesday. Results will be announced at 1:00 PM each day, so any reaction will come during early afternoon trading.

The bond market will close at 2:00 PM ET Thursday ahead of the New Year’s Day holiday, but the stock markets are scheduled to be open for a full day of trading. All banks and major U.S. financial markets will be closed Friday for the holiday and will reopen Monday morning for regular hours. As a result of the holiday schedule, we should see another round of lighter than normal trading a couple days. Therefore, don't be surprised to see larger moves in bonds with little apparent reason. I would be more concerned with bond losses early in the week than any that may come later in the week.

Overall, I am expecting to see Tuesday be the most active day for mortgage rates, although I don't see much to be worried about in this week's calendar. It is difficult to label any day as the calmest because even Monday that doesn’t have anything scheduled to be posted could also be relatively busy following last week’s light holiday trading. Accordingly, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

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