This week had a handful of economic reports for us to follow that are relevant to mortgage rates, but it will be more of the same as the past two weeks with no resolution yet in Washington. There were five monthly reports scheduled this week that we normally would need to be concerned with. However, due to the shutdown we are likely to only get two of them.
The bond market will be closed Monday in observance of the Columbus Day holiday as will most banks, so there will not be an update to this report Monday. The stock markets will be open for trading though. This means that the lenders that are open for business will likely not be issuing new rates Monday, opting to use Friday’s pricing or not accepting new rate locks. The bond market will reopen for regular trading Tuesday morning. It is worth noting though that due to weakness in bonds late Friday, we can expect to see an increase of approximately .250 of a discount point when new rates are posted unless your lender revised pricing higher already Friday afternoon.
What we will see this week in terms of monthly economic news, assuming that nothing changes in Washington, is the Federal Reserve’s Beige Book report Wednesday afternoon and September’s Leading Economic Indicators (LEI) Friday morning. The Federal Reserve is self-funded and therefore not affected by the government shutdown and the LEI comes from a non-governmental business research group that is based in New York.
The Beige Book will be posted at 2:00 PM ET Wednesday, which is named simply after the color of its cover. This report details economic conditions throughout the U.S. by Fed region and is relied upon heavily by the Federal Reserve when determining monetary policy at their FOMC meetings. If it reveals stronger or noticeably weaker signs of economic growth from the last release, we could see bond prices move and mortgage rates revise Wednesday afternoon. Signs of stronger growth would be negative for rates while much weaker conditions than the previous release would be favorable for the bond market and mortgage shoppers.
September’s LEI will be released by the Conference Board at 10:00 AM ET Friday morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.6% from August’s reading. This would indicate that economic activity is likely to increase over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline.
The reports that are delayed are September’s Consumer Price Index (CPI), Housing Starts and Industrial Production. The CPI measures inflation at the consumer level of the economy, so it is considered very important to the bond market and will be missed. The other two releases are generally considered to be moderately important to the bond and mortgage markets but still can affect mortgage rates if they show significant surprises.
Overall, this holiday-shortened week will still likely bring multiple days of noticeable movement in rates. Besides the minimal economic data to drive trading, we can also expect any rumors or progress regarding the shutdown or upcoming debt ceiling deadline to also influence the financial markets and mortgage rates. I currently believe there is much more risk by floating an interest rate than potential reward if closing in the near future. Therefore, please proceed cautiously if still floating a rate and maintain contact with your mortgage professional.