Trading activity in the mortgage market is light this morning as inclement weather --together with limited risk taking in front of Friday's much anticipated January nonfarm payroll data -- kept most investors on the sidelines. The selling pressure in today's early going is not so much a story about large numbers of traders looking to off-load mortgage-backed securities as it is about a shortage of buyers willing to stick their financial neck-out before a big event like the upcoming jobs number.



A report shortly after the market open by payroll processor ADP Employer Services suggesting the private sector added a stronger-than-expected 187,000 last month was largely discounted by most investors. The one consistent thing about this data set is that it substantially under- or over-shoots the more important numbers from the government.




The key question on the minds of all credit market participants is whether anything but weak hiring will be evident in Friday's nonfarm payroll report. Most investors anticipate the economy created 150,000 more jobs in January than were lost -- while the national jobless rate is expected to tick up to 9.5% from December's 9.4%. Numbers that match or fall below these projections will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the unlikely case the actual numbers are stronger than currently projected -- look for your investors to push mortgage rates higher.




Payrolls are harder to judge this time around given the incessant weather disruptions that have blanketed the nation. Raymond Stone, managing director and economists at Stone & McCarthy Research Associates points out that over the past seven years, the initial print on January payrolls has come in consistently below market expectations. In addition, December payrolls have been revised down 23 times over the past 31 years (75% of the time), with the average revision amounting to about 36,000 jobs. The "so what" factor attached to all this statistical mumbo jumbo is that while it is possible Friday's nonfarm payroll data will prove strong enough to push mortgage interest rates rudely higher from current levels - it is not a very probable outcome.



As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey figures for the week ended January 25th. The MBA said mortgage applications were up a collective 11.3% during the period - with refinance demand up by 11.7% and purchase loan requests up 9.5%. The average contract rate for 30-year fixed-rate mortgages finished up at 4.81%, up by 1 basis point from the prior week, down by 1 basis point from the month-ago mark and down 19 basis points from the year-ago level. Seven out of every ten loan applications taken last week were refinance requests.