Trading activity is light this morning in the mortgage market.  Investors are uninspired to do much of anything with a large number of them choosing to keep their hands in their pockets as the 2^nd-quarter and the first-half of 2009 wind down.  The majority of market participants will likely approach Thursday's nonfarm payroll data cautiously as well.  No sense in taking a chance of getting burned by a potential "surprise" payroll number prior to a three-day weekend.

Investors have already priced in expectations the number of jobs lost in June will match or exceed the consensus estimate of 355,000.   The national jobless rate is projected to ratchet up to 9.6% and that view is also reflected in current prices.  All will be well in the mortgage market as long as the actual numbers match or show an even worse picture of the labor sector than investors have already cranked in to their pricing models.  That is one side of a two sided coin.

The other possibility is that the actual numbers show a labor sector stronger than the majority of market participants anticipated.  If that's the case, Thursday's payroll data will immediately light a very short fuse on a very powerful firecracker - resulting in a mad scramble by investors to get out of the way before they get financially singed by the "hot" economic news.   Such a condition, should it develop, almost always results in higher mortgage interest rates.

Trading action in the stock markets will be the "wild card" in all of this.  I see reasons to believe the Dow and NASDAQ are becoming increasingly vulnerable to a multi-day downside price correction.  Should such an event occur, capital fleeing falling stock prices will tend to flow to the relative safe haven of Treasury obligations and mortgage-backed securities.  This so called "flight-to-quality" is generally supportive of steady to fractionally lower mortgage interest rates.  From a timing perspective - I think the chances are good the stock markets will put in a multi-day price high on, or before July 8^th.

Today's confirming 30 year fixed rate is at 5.375%.