Trading activity in the mortgage market is light again this morning. Investors have little to guide their rate setting decisions so the majority of them appear content to move to the sidelines as they await next week's big $109 billion four-part Treasury auction, a 2-day Federal Open Market Committee meeting, the results of the midterm elections and the release of the October nonfarm payroll report. Under current market conditions look for trading action in the mortgage market to be more sideways rather than directional for the balance of the week.
The Labor Department reported earlier this morning that initial claims for state unemployment benefits fell 23,000 during the week ended October 16th. The prior week's figures were revised up by 13,000, to the highest level since late August. Those workers who have used up their traditional benefits and are now collecting emergency and extended government payments increased by roughly 279,000 to 5.07 million during the latest reporting period. Most investors see this report as making it all but certain the Fed will launch another round of quantitative easing at the conclusion of their meeting on Wednesday, November 3rd. This expectation is already priced into the mortgage market so when the announcement is formally made - the reaction as reflected on investors' rate sheets will likely be muted.
There are a number of reasons to believe "the Dow and the Nasdaq will likely put in a cycle high this week - probably on Wednesday or Thursday." If that assessment proves accurate, the migration of capital leaving riskier assets like stocks for the safety of the Treasury and mortgage-backed security markets should prove supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates this week.
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