Will Interest Rates Go Lower Today?

I will continue to float this morning; not real bullish but willing to start holding locks. Keep abreast to the instant re-pricing alerts. Still a nervous trade.

Very early this morning the bond market tried to improve but got a gut punch on weekly jobless claims and settled back.  Interest rates at this time have remained stable.  At 8:00 the 10 yr note +3/32, mtg prices +1/32 and the DJIA +9. At 8:30 the 10 yr -1/32, mtgs -1/32 and the DJIA +40. At 9:00 the 10 -4/32, mtgs -1/32 and the DJIA +60. At 9:30 the DJIA opened +80, the 10 yr -4/32 and mortgages holding at unch.

Weekly jobless claims were expected to have declined 10K, they were down 20K to 512K for last week, the lowest weekly claims figure since early January when they were -488K. Continuing clams were lower also; at 5.749 mil from 5.817 mil the previous week. Jobless claims can have a huge impact on interest rates.

Also at 8:30 Q3 productivity, expected to be +6.5%, it jumped to +9.5%.  Not a positive sign for those looking for jobs; increasing productivity is getting more from employed workers than has been seen in six years. Unemployment figures are critical to interest rate movement.

Senate passed the bill extending the home buyers tax credit and adding 14 weeks to unemployment insurance; it goes to the House for quick passage then to Obama for a TV extravaganza signing event. This should have a positive impact on interest rates.

Yesterday’s statement from the FOMC meeting is still being chewed. Although the Fed said it would keep interest rates low for an “extended” period even as the economy shows early signs of growth and inflation isn’t a concern, it isn’t sitting well with fixed income investors. Traders and investors fear the Fed will repeat its mistakes of the past by keeping rates low too long, setting off an inflation spiral. Can’t necessarily agree with that view but it is in play with interest rate levels as low as they are. Unlikely Bernanke will make the Greenspan mistake, letting rates so low it set off the financial collapse and economic mess we face today. Greenspan blew it in hindsight (always crystal clear); he kept rates low to long and let liquidity build, the combo set banks and Wall Street on a binge that only Barney Frank could fix (yea right). Bernanke isn’t likely to make that mistake. Inflation fears are at once real and overblown now; but with long term rates at historically low levels and the easiest path up, traders and investors will not waiver on inflation concerns.

Retailers posted mixed October same-store sales, with teen-focused chains posting lower-than-expected sales, as the industry gears up for the critical holiday season. Teen retailers shares slumped on the news in premarket trading. But a handful of retailers reported better-than-expected sales, including Stage Stores Inc., Stein Mart Inc. and Wet Seal Inc. Gap Inc.’s same-store sales rose 4%, and the casual-clothing retailer said it expects fiscal third-quarter earnings above Wall Street’s expectations. October isn’t typically a strong sales month for retailers — proving a lull between back-to-school shopping and Christmas shopping.

With employment tomorrow look for generally quiet trade today in both stocks and bonds. Rate markets have a big hurdle; employment and next week’s refunding, $81B of notes and bonds.

If you are a Phoenix Homebuyer and need a low interest rate loan, get started here

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