Uncle Sam will be in the credit markets looking to sell $32 billion of three-year notes, $24 billion of 10-year notes, and $16 billion of 30-year bonds on Tuesday, Wednesday and Thursday. The Fed has been the dominant buyer of Treasuries sold at recent auctions. Fed Chairman Bernanke has about $75 billion of his original $600 billion "QE2" stimulus allocation left in his checkbook - a sum he intends to spend before the program ends next month. Most observers expect the Fed will use whatever amount is required to "crease-the-wheels" at this week's government debt sale. If so, the upcoming round of auctions will likely have little, if any discernible impact on the trend trajectory of mortgage interest rates.



Not much in the way of economic news is on the docket until Thursday when investors will react to the inflation data contained in the April Producer Price Index and we will get a chance to see how big a hunk, if any, higher energy prices took out of the April Retail Sales numbers. The second part of the inflation story will be told on Friday with the release of the April Consumer Price Index. As long as the core rates (a value that excludes the more volatile food and energy price components) of both the Producer and Consumer Price Indexes remain at 0.2% or below these two data series will likely have little influence on the level of mortgage interest rates. In the off-chance one or both of the core indexes of these two primary measures of inflation post a reading of 0.3% or more -- look for mortgage rates to make a noticeable move to higher levels.