The Commerce Department reported this morning that sales for U.S. wholesalers rose for the first time in eight months, contributing to a record drop in inventories. Sales rose 0.6% while inventory levels fell by 1.5% -- the biggest one month decline for wholesale inventories since records began in 1992. At the current sales pace, it would take 1.31 months for distributors to deplete inventory on hand. The sharp reduction in stockpiles means that a small increase in the pace of sales will generate a significant increase in the size of manufacturing and supplier orders - a major required cog in the machinery of economic recovery. While this data means nothing in terms of its impact on today's rate sheets - you can bet mortgage investors will begin to pay closer attention to this data series in the coming months.
In a separate report the Mortgage Bankers of America said the pace of mortgage applications rose last week, lead by demand for home purchase loans. For the week ended April 3rd the MBA's overall index of mortgage applications, which includes both requests for purchase and refinance loans, increased 4.7%. The purchase component of the overall index was up 11.1% while the refinance component posted an increase of 3.2%. The MBA said borrowing cost on 30-year fixed rate mortgages, excluding fees, averaged 4.73%, up 0.12 percentage points from the record low the previous week -- but well below the 5.78% that was recorded during this same week one-year ago. On a year-over-year basis mortgage applications are up 72.4%.
Uncle Sam will be in the credit market today looking to borrow $38 billion in the form of three-year notes. This offering should be well bid and should therefore create little, if any noticeable impact on mortgage interest rates. The Treasury auction will conclude at 1:00 p.m. ET.
Still to come at 2:00 p.m. ET today will be the release of the minutes from the Federal Open Market Committee March meeting. Investors will peruse this document looking for further insight into central bankers' decision to directly purchase $300 billion of Treasury obligations and to add an additional $750 billion to their available funds to purchase mortgage-backed securities. It is highly unlikely anything contained in this document will catch market participants by surprise. Look for this event to have no perceptible impact on the current trend trajectory of mortgage interest rates.
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