Mel's Blog

Wednesday's bond market has opened in negative territory following stock gains and a little stronger than expected economic report but it has since righted itself. The stock markets are rebounding from yesterday's losses with the Dow up over 79 points and the Nasdaq up 16 points. The bond market is currently up 6/32, but we likely see little change in this morning's mortgage rates due to strength in trading late yesterday.

Today's relevant economic data came from the Institute of Supply Management (ISM), who reported that their manufacturing index for June stood at 44.8. This was higher than what analysts had forecasted, indicating that manufacturer sentiment was stronger than thought. This is considered negative news for bonds and mortgage rates because strengthening manufacturing activity means that the economy is working towards a recovery. A weak economy makes bonds more attractive and stocks less appealing to investors.

Tomorrow morning brings us the release of two reports, including the almighty Employment report. The Labor Department will post June's unemployment rate, number of new payrolls added and average hourly earnings early tomorrow. These are considered to be very important readings of the employment sector and can have a huge impact on the financial markets. The ideal scenario for the bond market is rising unemployment, a large decline in payrolls and no change in earnings. Weaker than expected readings would likely help boost bond prices and lower mortgage rates tomorrow. However, stronger than expected readings could fuel a bond sell-off and be extremely detrimental to mortgage pricing. Analysts are expecting to see the unemployment rate rise 0.2% to 9.6%, while 363,000 jobs were lost and a 0.1% rise in earnings.

The Commerce Department will post May's Factory Orders data late tomorrow morning, which is similar to the Durable Goods Orders report that was released last week. The biggest difference is that this    week 's report covers both durable and non-durable goods. It usually doesn't have as much of an impact on the bond market as the durable goods data does, but can lead to changes in mortgage pricing if it varies greatly from forecasts. Current expectations are showing a 0.8% rise in new orders from April's levels. A smaller than expected rise in orders would be considered good news for the bond market, and could help lower mortgage rates. However, the employment data is much more important to the markets than this report is.

The financial markets will be closed Friday in observance of the Independence Day holiday and will reopen Monday morning. This may lead to additional volatility tomorrow as traders prepare for and protect themselves over the long weekend. There will not be an early close in the bond market tomorrow, but I suspect that trading will be thin during afternoon hours as market participants head home for the holiday weekend.

                                Mel

Friday's bond market has opened in positive territory despite stronger than expected economic readings. The stock markets are mixed, showing modest gains with the Dow up 17 points and the Nasdaq down  6 points. The bond market is currently up 62 basis points, which with yesterday's late strength should improve this morning's mortgage rates..

Today's major news was the initial reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It was expected to show that the economy shrank at a 1.5% annual rate last quarter, but actually revealed a 1.0% decline. In addition to the stronger than expected reading for this quarter, the 1st quarter's GDP was revised lower from down 5.5% to down 6.4%. The downward revision is not necessarily good news for bonds and mortgage rates because it is too old to influence trading. However, it does increase the size of the improvement from the 1st quarter to the 2nd quarter, which should be taken as a negative for bonds and mortgage pricing. Fortunately, traders seem to be less concerned with these results than many had expected.

The second report of the day was the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It also gave us stronger than expected results with a 0.4% increase. This means that wage and benefit costs rose slightly more than analysts had predicted. This is also negative news for the bond market because rising wages can lead to wage inflation that likely spreads to other parts of the economy. But as with the GDP reading, this data is not having much of an impact on today's trading or rates.

Yesterday's 7-year Treasury Note auction had mixed results. Some measurements of whether the sale went well or not showed respectable results. But other readings indicated that there was a lackluster intere st in the auction. The bond market initially reacted negatively but then managed to bounce back before closing.

Next week is fairly busy with economic postings, bringing us a couple of very important reports. There is relevant data being posted four out of the five days, including Monday morning. Monday's sole report is July's ISM manufacturing index. This important index measures manufacturer sentiment about business conditions and is usually the first report we see each month.

                Mel

Thursday's bond market has opened in negative territory following strong stock gains and renewed fears about the amount of debt the government is selling. The stock markets are rallying around fairly positive earnings reports that have the Dow up 83 points and the Nasdaq up 16 points. The bond market is currently up 19/32.

Today's only economic news was weekly unemployment claims from the Labor Department. They reported that 584,000 new claims for unemployment benefits were filed last week. This nearly matched forecasts and therefore has had no impact on this morning's bond trading or mortgage rates.

Neither of yesterday's afternoon events were favorable to bonds. The Fed Beige Book indicated that the economy is stabilizing in several regions of the U.S., which is bad for bonds because economic strength makes long-term securities such as mortgage-related bonds less attractive to investors. Yesterday's 5-year Note sale did not go too well, leading many to believe there is little chance of a strong demand in today's 7-year Note sale. If we do get another lackluster interest in today's auction, we most likely will see further weakness in bonds this afternoon. That may cause upward revisions to mortgage rates after the results are posted at 1:00 PM ET.

There are two important releases scheduled to be posted tomorrow morning. The first is the preliminary reading of the 2nd Quarter Gross Domestic Product (GDP), which is considered to be the best indicator of economic activity. It is the sum of all goods and services produced in the U.S. and usually has a great deal of influence on the financial markets. This reading is arguably the single most important piece of data we get regularly. Current forecasts are estimating that the economy shrank at a 1.5% annual rate du ring the second quarter. A smaller decline will probably hurt bond prices, leading to higher mortgage rates tomorrow. But a larger than expected decline could fuel a bond market rally and lead to lower mortgage pricing.

The second report of the day is the 2nd Quarter Employment Cost Index (ECI) that measures employers' costs for wages and benefits. It is considered to be an important measurement of wage inflation and can have a pretty big impact on the bond market and mortgage rates if it varies much from forecasts. If it shows a rapid increase, raising inflation concerns, the bond market may drop and mortgage rates rise. It is expected to reveal an increase of 0.3%.

I would not be surprised to see afternoon revisions to mortgage rates this afternoon and a sizable move tomorrow. If today's auction does not show a fairly strong interest from investors, particularly international buyers, and tomorrow's GDP reading gives us a stronger than expected readi ng, those changes will probably reflect higher rates.

                                Mel

Wednesday's bond market has opened in positive ground following the release of weaker than expected economic data and another soft opening in stocks. The Dow is currently down 267 points while the Nasdaq has slid 8 points. The bond market is currently up 6/32, which should improve this morning's mortgage rates.

The Commerce Department reported this morning that new orders for durable goods fell 2.5% last month. This was much weaker than the 0.5% decline that was expected, indicating that manufacturing activity for big-ticket items is slowing. That is good news for bonds and mortgage rates because a slowing manufacturing sector makes an economic recovery less likely anytime soon. However, a secondary reading that tracks new orders excluding the most volatile transportation-related orders showed a 1.1% increase. That was much higher than analysts were expecting, but fortunately bond traders have ignored the news.

We have an afternoon release that may affect bond trading and mortgage rates. The Federal Reserve will release its Beige Book report at 2:00 ET today. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meetings. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke's testimony to Congress last week gave us a recent update, I don't think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates this afternoon as a result of this report, but the possibly does exist.

Also today is the 5-year Treasury Note auction. Results of the sale will be posted at 1:00 PM ET. If it was met with a strong demand, we may see bond prices rise and mortgage rates fall during afternoon trading. However, a lackluster interest could lead to higher mortgage rates later today.

There is no relevant monthly or quarterly economic data scheduled for release tomorrow. The Labor Department will give us last week's unemployment figures, but this data is not considered to be of high importance because it basically tracks only a week's worth of new claims. It is expected to show that 585,000 new claims for unemployment benefits were filed last week. The larger the number, the better the news for bonds and mortgage rates. But, unless it varies greatly from forecasts, I don't see this news having much of an influence on bond trading or mortgage rates tomorrow.

                                Mel

Tuesday's bond market has opened in positive ground following early stock weakness and a weaker than expected consumer confidence reading. The stock markets are showing losses with the Dow down 34 points and the Nasdaq down 6 points. The bond market is currently up 14/32, which will likely improve this morning's mortgage rates.

The Conference Board gave us today's important data with the release of their Consumer Confidence Index (CCI) for July. This index measures consumer sentiment about their personal financial situations, giving us an idea of consumer willingness to spend. It showed a reading of 46.6 that fell short of forecasts by a couple of points. This is good news for bonds and mortgage rates because a less optimistic consumer is less likely to make a large purchase in the near future, limiting economic growth.

Tomorrow brings us two reports that may influence mortgage rates. The first will come from the Commerce Department when they post June's Durable Goods Orders at 8:30 AM ET. Current forecasts are currently calling for a decline in news orders of 0.5% from May to June. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket items. These are products that are expected to last at least three years. A stronger than expected number may lead to higher mortgage rates tomorrow morning. If it reveals a much larger than expected decline, mortgage rates should drop. It should be noted that this data is known to be extremely volatile from month to month, so a minor difference between forecasts and the actual reading may not move mortgage rates much.

The Federal Reserve will release its Beige Book report at 2:00 PM ET tomorrow afternoon. This report is named simply after the color of its cover, but it is considered to be important to the Fed when determining monetary policy during their FOMC meeting s. It details economic activity and conditions by region throughout the U.S. Since Fed Chairman Ben Bernanke's testimony to Congress last week gave us a recent update, I don't think we will see any significant surprises in this report. Therefore, we will likely see little movement in mortgage rates tomorrow afternoon as a result of this report, but the possibly does exist.

Also worth mentioning are a couple of Treasury auctions that may affect bond trading and mortgage rates this week. The two most important are tomorrow's 5-year and Thursday's 7-year Note sales. The last auctions of the 5-year and 7-year securities were met with very good demand from investors, leading to bond strength following the sales. But there is a record amount of debt being sold this week, so we need to proceed with caution over the next few days. Results of the sales will be posted 1:00 PM ET each day. If investor interest is strong again in Wednesday and Thursday's sales, we can expect the broader bond market to rally and mortgage rates to move lower. However, lackluster demand could lead to bond selling and higher mortgage rates during afternoon trading those days.

                                Mel

Business dispatched is business well-done, but business hurried is business ill-done." On the dispatch front, the housing sector seems to have weathered the storm and appears to be making headway toward smoother seas. In June, existing home sales rose 3.6 percent to an annual rate of 4.89 million units. This signals a rise of three months consecutively. Even though inventory remains high, at 9.4 months of supply, other indicators reflect stabilization in the housing market. For example, in the month of May, even though home values fell 5.6 percent versus last year, the decline was the smallest drop in the last 10 months. It appears that a combination of low interest rates coupled with incentives, have boosted demand.

In order to curb "ill-done" business, the Treasury department has authored a white paper on financial regulatory reform. As per the paper, the Fed will arm itself with powers to supervise firms, even if they are not banks, should mismanagement potentially pose a threat to future overall financial stability.

In news that should help the mortgage market, the Fed Chairman indicated in a Senate/House hearing earlier this week that the Fed would continue to support the agency-backed MBS (Mortgage Backed Securities) market. This is not anything new -- it is just a reiteration on the part of Mr. Bernanke of the Fed policy to purchase $1.25 Trillion in MBS by the end of this year. Still, it is comforting reassurance.

On Wall Street, there was a significant uptick with the S&P 500 flirting with the 1,000 level. With the earnings releases of over a 100 companies sending the indices surging, the Dow gained 4 percent for the week, the NASDAQ, 4.2 percent and the S&P 500, 4.1 percent. While many companies beat expectations, it is significant that earnings were primarily driven higher as a result of cost-trimming measures, rather than top-line revenue growth. Even if the appetite for risk may be reviving, given the buoyancy in the stock markets, companies need to come up with ways of boosting sales in this tough economic environment. The good news in this context is that last week's consumer sentiment index indicated that consumer confidence is stable, despite falling back from June's peak. That ought to provide confidence to corporations which in turn can start rehiring in anticipation of greater sales, leading to lower unemployment and a positive feedback cycle in general.

On the commodities front, the price of oil spurted (no pun intended) to $68 a barrel on hopes of a global economic revival but the resistance level of $70 per barrel is proving difficult to break. Hence, there is a sideways movement in the range of $60-70 per barrel. Any higher price movement will certainly negatively impact the overall global recovery. Gold is still trading below the $1,000 per ounce mark. Other commodities such as copper, aluminum, steel etc., are also trending at lower levels and since the energy input is driven by oil, commodity prices are closely tracking oil price movements.

With swine flu swirling around threatening one and all, health is wealth, both for you as well as your organization. While individuals have to deal with medical bills, companies are currently worrying about the impact that the proposed health care reform would have on insurance cost in terms of providing employees health coverage. Political leaders are unable to agree on whether the proposed reform outlined by President Obama would save the nation money or increase the deficit of the federal government even more. So while they spend countless hours (not to mention countless cups of coffee) trying to resolve this issue, let us take charge of our health and get fit. On that note, we may soon have an option to buy chocolates made with camel's milk, which some regard as a healthier alternative to the familiar cow's milk variety. While it may be costlier than the regular variety, who knows, it may save on medical bills.

The focus of the Street in the coming week will be on a barrage of earnings releases as well as on economic reports such as new home sales, the Case-Shiller index, Treasury bill/notes auction and settlement, consumer confidence, jobless claims and the Fed Balance Sheet report.

                                Mel

Information Provided Amtust Bank Capital Markets

Thursday's bond market has opened in negative territory following early stock gains. The stock markets are showing strength during early trading with the Dow up 188 points and the Nasdaq up 47 points. The bond market is currently down 66 basis points, which will likely push this morning's mortgage rates higher.

This morning's early data came from the Labor Deportment who reported that 554,000 new claims for unemployment benefits were filed last week. This was a sizable increase from the previous week, which is good news for bonds and mortgage rates. However, this figure was close to analysts' forecasts and since this data is not considered highly important, its impact on this morning's mortgage rates has been minimal.

The National Association of Realtors gave us June's Existing Home Sales report. They showed an increase of 3.6% in home resales last month. This was slightly higher than expected, but it was not enough of a variance to influence this morning's bond trading or mortgage rates.

Neither of today's economic releases have enough influence to lead to this morning's stock strength and bond weakness. I suspect the selling in bonds is much more of a result of the stock gains as investors sell bond holding and shift funds into stocks. Whether this is temporary or a trend is yet to be seen. But I am staying on the cautious side towards mortgage rates as it appears there is more room for bonds to fall, at least short-term.

Tomorrow's only relevant economic data is the final revision to July's University of Michigan Index of Consumer Sentiment that will help us measure consumer optimism about their own financial situations. This is important because rising consumer confidence means that consumers may be apt to make large purchases in the near future. This adds fuel to the economic recovery and is looked at as bad news for bonds. It is an update to the preliminary reading we saw two weeks ago, so unless we see a drastic revision to the preliminary estimate, I think the markets will probably shrug this news off.

                                Mel

Thursday's bond market has opened well in positive territory, recovering most of yesterday's losses. The stock markets are  up, with the Dow up 95 points and the Nasdaq up 22 points. The bond market is currently up 53 basis points.

The bond market had extended its losses during afternoon trading after the FOMC minutes indicated that Fed members think the recession should be ending soon. They expect that unemployment will still rise, possibly exceeding 10% this year. But they also revised their Gross Domestic Product (GDP) predictions upwards from previous forecasts. The GDP is the measure of all goods and services produced in the U.S., therefore, it is the benchmark reading for tracking economic activity. The unemployment rate revision was favorable to bonds, but the upward revision to GDP forecasts and other optimistic comments about the economy in the minutes led to more selling in bonds late yesterday.

Today's only data were weekly unemployment figures from the Labor Department. They reported that 522,000 new claims for benefits were filed last week. This was lower than expected and the lowest total since early January. Fortunately for mortgage shoppers, this data has a minimal impact on trading and mortgage rates because it covers only a week's worth of claims.

Tomorrow's only relevant data is June's Housing Starts report. This data gives us an indication of housing sector strength, but is not considered to be of high importance. Analysts are currently expecting to see little change in new starts of housing projects from May to June. However, I don't see this data having much of an impact on mortgage rates unless it varies greatly from forecasts.

                                Mel

Wednesday's bond market has opened in negative territory again after this morning's economic data gave us stronger than expected results and yesterday's after-hours earnings release from tech giant Intel has helped boost stock prices during early trading. The Dow is currently up 257 points while the Nasdaq has gained 63 points. The bond market is currently down 62 basis points, which will likely push this morning's mortgage rates higher.

The Labor Department gave us the first piece of data with their release of June's Consumer Price Index (CPI). It revealed a 0.7% increase in the overall index and a 0.2% rise in the core data that excludes more volatile food and energy prices. Both of these readings were 0.1% above forecasts, meaning that prices rose slightly more than expected at the consumer level of the economy. This is considered negative news for the bond market because rising prices means inflation is strengthening. Inflation erodes the value of a bond's future fixed interest payments, making them less attractive to investors. Generally speaking, as bond prices fall, mortgage rates rise.

Today's second report showed that output at U.S. factories, mines and utilities fell 0.4% last month. While the decline can be considered good news for bonds and mortgage rates, it was however, a smaller drop than the 0.6% that analysts had predicted. This indicates that Industrial Production was stronger than thought, meaning the results are a negative towards bonds.

Later this afternoon, we will get the release of the minutes from the last FOMC meeting. There is a possibility of the markets reacting to them following their 2:00 PM ET release, especially if they show some divisiveness by its members during discussion and voting at the last meeting or give any indication of the Fed's possible next move with monetary policy. I suspect that we will see comments that are not exactly favorable to bonds and mortgage rates, therefore, I would not be surprised to see afternoon volatility in trading and possibly even an upward revision to mortgage rates.

There is no relevant monthly or quarterly economic data scheduled for release tomorrow. The Labor department will give us weekly unemployment claim figures, but this data usually does not have much of an influence on bond trading or mortgage rates unless it varies greatly from forecasts. They are expected to show that 552,000 new claims for benefits were filed last week, down from the previous week's total. The larger the number, the better the news for mortgage rates.

                                Mel

The economy continues down its meandering path to recovery, but the markets are starting to come to grips with the fact that the easy money has been made, and improvements from here will be slow and modest. The S&P 500 Index was off 2.1% for the week and is off 4.5% so far this month. The drop represents a reversal of the second quarter’s strong 15.2% gain, which was itself a reversal of the massive drop the equity markets went through since late 2007.  At least each successive wavelet has been decreasing in amplitude! The March-June rally was driven by an expectation that the government’s stimulus program and financial system bailouts, aided by the market’s own self-correcting mechanisms, would ultimately pull the economy out of recession and return corporate America to health. The fundamental case for that outlook hasn’t changed, but it is being tempered by a dose of reality about what the economy will look like when things settle down to a “new normal”.

The International Monetary Fund released an updated economic forecast, predicting that the global economy is on course to shrink 1.4% in 2009 and then grow 2.5% in 2010. That would be a modest and sustainable growth path, but well below the markets' exuberant expectations formed over the past 15+ years of boom times leading up to the recession.

Last week, Laura Tyson, one of Obama's advisors but not formally a member of the Administration, made mention that perhaps another round of economic stimulus would be needed. I’m sure she floated this trial balloon to help the Administration get a reading on how many people would try to shoot it down. The good thing about stimulus plans is that they help prevent us from sinking into another Great Depression. The bad part is that they cost money – money that the government ends up having to borrow.

Government borrowing was very much in evidence last week as the U.S. Treasury conducted four debt auctions (a new record), one on each day from Monday through Thursday. The Treasury auctioned 10 year Treasury Inflation-Protected Securities, 3 year fixed-rate Notes, 10 year Notes, and 30 year Bonds. To its credit, the Treasury was able to auction (and the markets were able to absorb) over $74 billion worth of securities in a short period of time. Of course, in our capacity as U.S. taxpayers we will ultimately pay for it all, with interest.

Or will we?  That question has been on the minds of China's finance officials, and they’ve been sharing their thoughts with us rather publicly over the past month or so. Given that China is now the largest external holder of U.S. Treasury debt (followed by Japan as a close second), they are justifiably concerned about whether the U.S. will ultimately have the willingness and ability to repay its debts with real money. Some of the innovative measures the Federal Reserve has recently taken amount to “monetizing” part of the debt, which is the economic equivalent of running the printing presses. This ultimately creates inflationary pressure. The Chinese don't want to end up facing any of three unfortunate scenarios somewhere down the road, either (a) an outright default by a U.S. government that simply can't pay, or (b) a California-style default where the government pays its obligations in some form of funny-money IOU's, or (c) nominal debts being repaid in monetized, hyper-inflated dollars.

So for this week, watch for key inflation measures to be released on Tuesday and Thursday in the form of the Producer Price Index and the Consumer Price Index. Inflation has been quiescent lately, with retail sales down, consumer spending off, and oil prices dramatically lower than they were a year ago.  However, this author is of the opinion that once the economy emerges from recession, inflation will be the primary risk facing investors over the next three to five years.

                        Mel

Information provided by Amtrust Bank Capital Markets

Thursday's bond market has opened well in negative territory as investors reverse positions taken over the past few days. This can also be considered profit-taking to capture the gains from the recent rally. The stock markets opened with gains but are now mixed with the Dow down a 6 points and the Nasdaq up 7 points. The bond market is currently down 34 basis points, but we will still see an improvement in this morning's mortgage rates compared to yesterday's morning rates due to gains late yesterday.

This morning's weekly unemployment figures showed a surprise drop in new claims for benefits. The Labor Department reported that 565,000 new claims were filed last week. This was much lower than the 603,000 that was expected. However, seasonal plant closings and the Independence Day holiday are believed to have skewed the final total. This data is not considered to be of high importance, but the size of the drop in claims and the fact it's the lowest total since January did catch the attention of traders and may be contributing to this morning's losses in bonds.

Yesterday's late rally in bonds was attributed to an overwhelmingly positive auction of 10-year Treasury Notes. The results showed that there was still a good demand for government securities, leading to buying in the broader bond market. This led to afternoon improvements in mortgage rates yesterday. But, it appears that some traders think that bonds are ready for a pullback and are selling holdings this morning. This could be a result of Alcoa's earnings last night that beat estimates or simply an expectation of profit-taking from the recent rally in bonds. Regardless of the reasoning, bonds are not looking pretty this morning. The question is whether the rally has run out of steam or is this is just a minor setback before another move higher.

Today also brings us the $11 billion auction of 30-year Bonds. Results of this sale will be posted at 1:00 PM ET, but this auction will most likely be of much less importance to the markets and mortgage rates than yesterday's 10-year sale was. I believe that it can do more harm than good if that makes sense. A strong demand from traders probably will be considered old news and not be enough to reverse this morning's losses. However, a weak demand could raise more concern that the bond rally may be ending, possibly leading to even more selling this afternoon. That could lead to afternoon increases in mortgage rates.

There are two economic reports scheduled for release tomorrow morning. The first is May's Goods and Services Trade Balance report during early trading, which measures the size of the U.S. trade deficit. This data is not considered to be of high importance to the bond market and will not likely have an impact on mortgage rates. However, if it does vary greatly from analysts' forecasts of a $30.0 billion deficit , we may see some movement in bond prices and possibly a slight change in mortgage pricing.

The second monthly report is the University of Michigan's Index of Consumer Sentiment that is released in a preliminary form each month and then followed up two weeks later with a final reading. The preliminary reading for July will be posted late tomorrow morning and is expected to fall from June's final reading of 70.8. This would indicate that consumers were less comfortable with their own financial situations this month than last month. It is believed that if consumers are confident in their own finances, they are more apt to make large purchases in the near future. And with consumer spending making up two-thirds of our economy, investors pay close attention to reports such as these.

                                Mel

Wednesday's bond market has opened flat again as investors prepare for the events of the next couple of days. The stock markets are showing minor gains after yesterday's afternoon sell-off. The Dow is currently up 28 points while the Nasdaq is nearly unchanged. The bond market is currently up 3/32, which will likely keep this morning's mortgage rates near yesterday's morning rates.

There is no relevant economic data scheduled for release yet again today. But we do have two issues that are quite relevant to bond trading and mortgage rates. The first is today's 10-year Treasury Note auction. Results of the sale will be posted at 1:00 PM ET. If the sale was met with a strong demand from investors, particularly international buyers, we could see bonds rally during afternoon trading. The flip side is that a weak demand would indicate a waning interest in U.S. securities, making current bonds less appealing to investors. That likely would drive bond prices lower and mortgage rates higher this afternoon.

The second event is the release of quarterly earnings from Dow component Alcoa after the stock markets close today. They traditionally are the first major company to release earnings each quarter. If their results and forecasts fall short of expectations, we can expect to see stocks fall during after-hours trading and early tomorrow morning. The stock weakness could drive bonds higher as traders seek safe-haven in bonds. But if they beat forecasts, we will probably see stocks move higher, drawing funds from bonds and leading to higher mortgage rates in the morning.

The only semi-relevant economic data scheduled for release tomorrow morning are weekly unemployment figures from the Labor Department. They are expected to say that 600,000 new claims for unemployment benefits were filed last week. This would be a decline from the previous week's total. However, this data usually has a limited impact on bond trading and mortgage rates since it gives us only a week's worth of new claims. With no other relevant economic data on the calendar tomorrow and little news already posted this week, we may see a slightly stronger than usual reaction to the results. But I don't see this data being a market mover tomorrow or significantly affecting mortgage rates.

Also tomorrow is the Treasury's sale of 30-year Bonds. This sale is less likely to affect mortgage rates than today's 10-year Note sale does, but that doesn't mean we can ignore its results. The same principals apply as today's strong demand is favorable for bonds while a lackluster interest could lead to bond weakness and potential increases to mortgage rates.

Friday morning gives us some factual monthly economic data for the markets to digest. Neither of the two reports are considered to be of high importance to the financial markets or mortgage rates, but do carry enough weight to cause some movement if their results vary greatly from forecasts. We will touch more on those in tomorrow's commentary.

                                Mel

Tuesday's bond market has opened relatively flat with no relevant economic news on the agenda today. The stock markets are showing losses with the Dow down 130 points and the Nasdaq down 32 points. The bond market is currently up 19/32, but we will see an improvement in this morning's mortgage rates  due to strength late yesterday.

There is no relevant economic news scheduled for release again today. The weakness in stocks will probably keep bonds from turning sour today. We have seen some improvements in mortgage rates over the past couple of days, but there is question as to whether or not they can hold. It currently appears that they may for the time being, but we know that mortgage rates will rise much quicker than they improve. Accordingly, if still floating an interest rate please be very cautious over the next several days. At least until we get the results of Wednesday's Treasury auction and a couple of the major earnings releases behind us.

There are only two monthly economic reports being posted this week and they both come Friday. There are also two relevant Treasury auctions left that may influence mortgage rates. 10-year Notes will be sold tomorrow and 30-year Bonds Thursday. These sales can influence market trading in bonds and possibly affect mortgage rates. If the sales are met with a strong demand from investors, particularly Wednesday's sale, we should see afternoon improvements in bonds that could lead to downward revisions to mortgage rates. However, if concerns over the amount of debt being sold keeps buyers on the sidelines, we may see bonds fall after results are posted at 1:00 PM ET and mortgage rates move higher during afternoon trading tomorrow or Thursday.

Tomorrow kicks off the earnings season when Alcoa posts their quarterly results. Market participants are anxiously waiting for these results to see just how hard the weak economy is affecting earnings. Just as important as this past quarter's results are their forward-looking estimates. If revenue, earnings and projections from the big-named companies exceed expectations, stocks will likely rally, making bonds less appealing to investors. But if results are weaker than expected, indicating that the economy is still stifling earnings, bonds will be more attractive to investors as stocks slide. This could help boost bond prices and lead to lower mortgage rates.

                  Mel

While America celebrated it's 233rd year as a sovereign nation this week, investors were struggling with the worst recession since 1930. The market lost some of its gains from the past couple of weeks, which proves that investor confidence is slowly slipping. However, investors are still looking at corporate earnings to get some insight about a potential recovery.

Investors were still looking for some good economic indicators during the holiday--shortened week in hopes of some signs that the economy is stabilizing. Unfortunately, the low consumer sentiment index and a poor labor department report provided a reality check that the economic recovery is still a long way off. The market had an exceptional second quarter, as the Standard & Poor's 500 index gained nearly 40 percent-its best gain over such a period in the last 10 years. All major indexes continued their downward trend for the third week, with the Dow ending 1.9 percent down from the past week while the S&P 500 and NASDAQ were down by nearly 2 percent.

The Conference Board's measure of Consumer Confidence was down to 49.3 for the month of June after having an unusual upward jump in the month of May, giving an ample indication to investors that things are not going as good as they seem. Adding to investor woes, the unemployment rate reached 9.5 percent, an increase of .1 percent from last month. The employment rolls took a turn for the worst in June, losing 467,000 jobs this month, compared to 322,000 in May. However, the severity of job loss has lessened in the last couple of months, as initial jobless claims came down to 614,000 from 675,000 (end of first quarter). Also, factory activity experienced some stability, as The Institute of Supply Management's national survey for June produced a decent reading of 44.8.

With no indications of new support from the Fed or the Treasury, the struggling housing market has still not shown any meaningful signs of recovery. However, the Obama administration has expanded the refinance program to home-owners who owe more money than their current home value. Under this updated program, Fannie and Freddie will refinance up to 125 percent loan to value, an increase from a previous 105 percent. This past week, 30 year Conforming Fixed mortgage interest rates were stable around 5.4 percent, as the 10 year Treasury moved downwards to 3.5 percent. As per the Mortgage Bankers Association, for the week ending Jun 26, 2009, mortgage application volume was down by nearly 18 percent, while refinances were down by 30 percent from the previous week.

The coming week will keep investors busy with economic indicators giving a much clearer picture of economic health. Important numbers to be released this week include the Trade Balance, Import price index and Consumer confidence on Wednesday, the monthly budget statement on Thursday, and the Producer Price index and Retail sales on Friday.

                                Mel       

Information provided by Amtrust Bank Capital Markets

Thursday's bond market has opened in positive territory following a weak opening on stocks. The stock markets are posting sizable losses with the Dow down 174 points and the Nasdaq 43 points. The bond market is currently up 9/32, which, with yesterday's late strength, should improve this morning's mortgage rates by approximately .375 of a discount point compared to yesterday's morning rates.

This morning's economic data gave us mixed results, beginning when the Labor Department reported that the U.S. unemployment rose 0.1% last month to stand at 9.5%. This was slightly lower than the 9.6% that many analysts and market traders had expected and can be considered negative for bonds because it fell short of forecasts.

However, the other two headline numbers from this report gave us favorable results and are making the biggest impact on bond trading this morning. The report showed that 467,000 jobs were lost during the month, exceeding forecasts of approximately 365,000. In addition, the reading that gives average hourly earnings showed no change from May's level. This means that earnings did not rise when they were expected to move higher 0.1%. While the earnings data may not be good for workers, it shows that wage inflation is little threat at this time.

May's Factory Orders data was released late this morning by the Commerce Department. It showed that combined orders for durable and non-durable goods rose 1.2% last month. This was also stronger than analysts' forecasts and hints that manufacturing activity was better than expected. Fortunately, this data is not one of the most important reports we see each month and has not derailed this morning's momentum from the employment figures.

Overall, the Employment report was favorable for bonds with the larger than expected decline in jobs taking center stage. The unemployment rate was somewhat of a disappointment, but it was still an increase from May's rate. The average hourly earnings reading is the least important of the three but still gave us favorable results. The Factory Orders report was not favorable to bonds or mortgage rates, but it also has nowhere near the level of importance as the monthly Employment report. Therefore, today's data can be considered good news for bonds and mortgage rates.

The financial markets will be closed tomorrow in observance of the Independence Day holiday and will reopen Monday morning. There will not be an early close in the bond market today, but I suspect that trading will be thin during afternoon hours as market participants head home for the holiday weekend. This means we should see a fairly quiet afternoon in bonds and mortgage pricing as long as no unexpected news surprises the markets.

                                Mel