Thursday, March 12, 2009

It is another very quiet start to the day in the mortgage market. Mortgage investors simply yawned at the surprise uptick in the February Retail Sales figures - especially since the weekly jobless claims report confirmed expectations for continued deterioration in the labor sector.

The Commerce Department's headline February Retail Sales figure slipped 0.1% after rising by a revised 1.8% in January. Most economists had projected February Retail Sales would plunge by 0.5% or more. The real surprise contained in the Commerce Department's report was news that once auto sales were washed-out of the data - retails sales posted a 0.7% increase last month.
The "so what" factor here is that all this statistical mumbo-jumbo clearly indicates the consumer is not completely wiped out. The trump to this better-than-expected news from the retail sector is data that shows the labor sector remains under withering downward pressure.

In a separate report, the Labor Department said this morning that while first time claims for jobless benefits rose by a modest 9,000 - the number of people remaining on the benefits roll after drawing an initial week of aid rose to a record 5.3 million last week. Until conditions in the labor sector show notable signs of recovery - mortgage investors are likely to continue to shrug off stronger-than-expected retail sales data - reasoning that sales are going nowhere on a sustained basis without job growth as the primary driver.

At 1:00 p.m. ET this afternoon the Treasury Department will wrap-up the last part of this week's three-part auction with the sale of $11 billion of 30-year bonds. Judging by how stable the 30-year Treasury bond has been trading through the first two-trading hours of the day - it looks like fixed-income investors expect buyers' appetite for this offering will be decent. If that assessment proves accurate, the impact of today's Treasury auction on the trend trajectory of mortgage interest rates should be essentially non-existent.