We have plenty of economic news this week including the Consumer Confidence Index, first quarter's GDP and a Fed meeting. Wednesday should be the biggest mover for rates. Since the market already expects the Fed to cut rates and GDP to show a very small annual increase, any deviation from expectations will likely push mortgage rates higher.
The first report comes late tomorrow morning when the Consumer Confidence Index (CCI) for April will be released. This Conference Board index is a key indicator of future spending by consumers. The group surveys 5000 consumers from across the country about their personal financial situations. If sentiment is strong or rising, it is believed that consumers are more apt to continue to spend. However, if they are concerned about issues such as job security and investments, they will probably delay making large purchases. The latter is better for the bond market and mortgage rates because the expected slowdown in spending would ease inflation concerns. But, a sizable increase could hurt the bond market, pushing mortgage rates higher Tuesday.
Wednesday brings us the release of two important reports along with the FOMC meeting results. The first is the preliminary version of the 1st Quarter Gross Domestic Product (GDP). This is arguably the single most important report that we see on a regular basis. The GDP is the sum of all products and services produced in the U.S. and is considered to be the best indicator of economic growth or contraction. I expect this report to cause major movement in the financial markets Wednesday and therefore the mortgage market also. Analysts are expecting to see output at an annual rate of 0.4%. A larger increase would almost certainly cause inflation concerns in the bond market that would push mortgage rates higher Wednesday morning.
This week's FOMC meeting will begin tomorrow but will not adjourn until Wednesday afternoon. It will likely adjourn with an announcement of another rate cut to key short term interest rates. Just how much of a reduction is open for debate. Look for another round of volatility following the 2:15 PM ET post-meeting statement.
Overall, look for plenty of movement in the financial markets and mortgage rates this week. Wednesday or Friday will likely be the most important day of the week with the GDP and Employment numbers being posted along with the FOMC adjournment, but we may see noticeable changes to rates tomorrow also.
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Lew Corcoran, ASP®, IAHSP, IAHSP-CB