Daily Commentary by Larry Baer 12/10/2009

SHORT-TERM TREND (10 days or less). Favors higher rates and lower investor prices.

LONG-TERM TREND (11 days or more) Favors higher rates and lower investor prices.

Commentary: Mortgage investors are allowing mortgage interest rates to drift fractionally higher in this morning's early going.

Uncle Sam will be in the credit market today looking to borrow $13 billion in the form of 30-year bonds. Yesterday's $21 billion 10-year note offering did not find as strong as demand as many had expected -- causing the Treasury Department to "sweeten-the-pot" by offering slightly higher yields in order to attract the required capital. Many now believe the yield on today's 30-year bond will likely finish the day higher than where it started. If so, look for mortgage interest rates to creep higher as well. I will post an update on the 30-year bond auction results at soon as possible following the conclusion of bidding at 1:00 p.m. ET.

This morning's weekly initial jobless claims report for the week ended December 5th drew little more than a passing glance from most mortgage investors. Initial claims for state unemployment insurance rose 17,000 to 474,000 last week. A Labor Department spokesman said claims had been bumped by seasonal industries laying people off and by applications that had been held back during the Thanksgiving holiday week. Even though claims rose last week, applications for unemployment benefits have dropped from lofty levels in March - but until claims fall above the 400,000 level -- it is unlikely this data series will exert much, if any upward pressure on mortgage interest rates.

Be patient - be disciplined - and play it by the numbers.


THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME