Yesterday's 5-year note auction was a bust - which is making investors extremely skittish as Uncle Sam returns to the credit markets this afternoon looking to borrow $32 billion in the form of 7-year notes. The unbridled wave of federal spending is beginning to create anxiety and uncertainty among global investors about Uncle Sam's long-term ability to service his ballooning mountain of debt. Sensitivity levels are particular high as the debt crisis spasms of Greece and Portugal produce financial headlines around the world. The current credit market environment will make it particularly difficult for the Treasury Department to peddle today's $32 billion stack of 7-year notes without a substantial "mark-down" in the price of this instrument. If such an event occurs, the upward pressure on mortgage interest rates will not likely abate much today.
The Labor Department reported earlier this morning that the number of workers standing in line to file first-time claims for jobless benefits fell 14,000 to a seasonally adjusted 442,000 during the week ended March 20th. The four-week moving average of new claims, a process that irons out the week-to-week volatility of the raw data, fell 11,000 to 453,000. The number of people enrolled in the government's Emergency Unemployment Compensation program fell sharply as well. The employment sector appears to be showing some faint signs of life after lying comatose for the better part of two-years. Even so, until the total number of initial jobless claims falls below 400,000 on a week-over-week basis this data will generally continue to be viewed by most analysts as supportive of the prospects for steady to perhaps fractionally lower rates.
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