Commentary: Uncle Sam will be in the credit markets one more time today looking to peddle $13 billion worth of 30-year notes. This will be the last of three Treasury auctions scheduled for the week - and like the others - today's event will conclude at 1:00 p.m. ET. I'll post the auction results on my website as quickly as possible once the final gavel falls.
Spain and Italy staged successful bond sales earlier today reducing, at least temporarily, the flow of "flight-to-quality" capital moving from riskier debt instruments in Europe to the relative safe-haven of U.S. Treasury debt obligations. Even so, a 30-year Treasury bond with a yield north of 4.50% (currently trading with a yield of 4.508%) will probably be hard to resist for market participants like pension funds and insurance companies that have explicit need to hold long-term debt as part of their asset-liability matching requirements.
The first 30-mintues following the auction will likely see whipsaw trading action in the mortgage market - before the real underlying trend establishes itself. Though it is a close call - my models are flashing signals suggesting the 30-year bond auction will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. A poorly bid auction this afternoon will almost certainly induce mortgage investors to push note rates higher. Heads up.
In other almost unnoticed news of the day the Labor Department reported claims for the week ended January 8th climbed by 35,000. Experienced traders essentially shrugged-off this outsized surge in the number of Americans standing in line to file for their first week of jobless benefits. The first week or two of the year is "historically the highest week for claims because of the Christmas and New Year's holidays.
In a separate report the Labor Department said prices at the producer level climbed 1.1% higher in December, largely reflecting a spike in energy prices. Excluding the more volatile food and energy components of this data set, the core rate of inflation for wholesalers rose a tame 0.2% last month. These numbers were generally inline with most market participant's expectations - and therefore had no perceptible impact on the direction of mortgage interest rates today.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
