Although the data due out this week is not vitally important to rates, the economic calendar is fairly busy. We could potentially see action in terms of rates with the bulk of it happening today and tomorrow afternoon. Already this morning we have heard from the Federal Reserve Bank of Philadelphia President, Charles Plosser, who expressed concerns and disagreement with the Fed and Chairwoman Yellen’s current policy toward employment and inflation. Given current economic conditions, Plosser believes present policy is too passive and made a case this morning for a more aggressive policy approach. While this isn’t likely to have an impact on rates it is something to keep an eye on.
More important to rates are the New Home Sales and Consumer Confidence Index reports, both of which could have an impact on rates. The Consumer Confidence Index, which came out this morning measures consumer’s overall sentiment and willingness to spend. Because consumer spending accounts for so much, (more than two thirds) of the economy, tracking consumer behavior gives investors a good idea of the strength of the economy and where it is headed. As the graph indicates, today’s Consumer Confidence report shows that consumer confidence is steadily improving and has reached a new high of 85.2 in June, up from 82.2 in May. Analysts have indicated this is the fourth month in a row the index has reached above 80, meaning consumer sentiment is optimistic overall. While this is good news for the economy we could see a slight increase in rates as a result.
The New Home sales report, which also came out this morning showed a sizeable increase (18.6%) making the annual rate around 504,000 which is much higher than forecasters were expecting. While this report generally has a negligible impact on rates because it pertains to such a small segment of the market, the unexpected results could lead to some volatility in rates this afternoon with the stock market leading the way and already showing gains this morning.
Due to the information released in this morning’s reports I’m expecting this afternoon will be the busiest day in terms of rate movement and we will likely see an overall increase in rates today. Besides that, there isn’t much more excitement slated for the remainder of the week and rates could level off by weeks end.
Graph taken from: http://www.bloomberg.com/markets/economic-calendar/