Monday, January 17, 2022
|

 

Updated on January 16, 2022 9:24:53 PM EST

The first item on this weeks calendar comes Wednesday morning when Decembers Housing Starts report is posted at 8:30 AM ET. It will tell us how many new home groundbreakings took place during the month. While this data gives us a small indication of housing sector strength, it is not known to be highly influential on mortgage rates. Accordingly, it will take a large variance from forecasts for the report to have a direct impact on Wednesday’s pricing. Forecasts show a decline in new home sales. A large decline in sales would be considered favorable.

Also Wednesday will be the 20-year Treasury Note auction. These auctions show what type of demand investors have for long-term securities. If demand is strong in the sale, particularly from international buyers, we could see the broader bond market improve after results are posted at 1:00 PM ET. On the other hand, lackluster interest in the securities may lead to an upward revision to rates before the end of the day.

Decembers Existing Home Sales from the National Association of Realtors is set for release late Thursday morning. This data will give us detailed information about housing sector strength and mortgage demand by tracking home resales in the U.S. It is expected to show a small decline in sales from Novembers level, meaning the housing sector softened slightly last month. Ideally, bond traders would like to see a large decline in sales, pointing towards sector weakness because weaker housing makes broader economic growth more difficult. As long as we dont see a significant surprise in sales, it shouldnt have a noticeable impact on mortgage rates.

The final report of the week will be Decembers Leading Economic Indicators (LEI) at 10:00 AM ET Friday. The Conference Board, who is a New York-based business research group, compiles the data and releases this report. It attempts to predict economic activity over the next several months, but since it is posted by a non-governmental agency, it is not considered to be of high importance to the financial and mortgage markets. Fridays release is expected to reveal a 0.7% rise, meaning the indicators are predicting growth in economic activity over the next several months. As long as we dont see a noticeable increase, I dont think this data will have much of an impact on mortgage pricing either.

Also worth noting is the fact that we are heading into corporate earnings season this week. As big-named companies report their results, stocks should react accordingly. Stronger than expected earnings will likely boost stocks and hurt bond prices, pushing mortgage rates higher. Generally speaking, news that is good for stocks is bad for bonds and mortgage rates. However, disappointing results could lead to lower mortgage rates. With little economic data or other events scheduled this week to drive trading, stocks may end up having the strongest effect on rates.

Overall, no day stands out as a strong candidate for most active day for rates. Tuesday is a possibility following the long weekend. There is little data for the markets to digest, probably leaving stocks to be the focus several days. We have seen bonds and rates on a serious upward trend over the past couple weeks. Hopefully, the selling will subside this week and mortgage rates can recover some of their recent upward move.

 ©Mortgage Commentary 2022