Fixed-income investors have been doing a pretty good job of absorbing all the supply the government has been pumping into the market place this week.  Yesterday's 3-year note auction result was decent - just not as strong as at the previous auction of these securities. 

Market participants are preparing for a $19 billion sale of 10-year notes today.  The government's debt auction process will conclude at 1:00 p.m. ET.  The realization that the Fed will not raise short-term interest rates anytime soon combined with major slack in the labor sector should prove to be key pillars of support favoring solid bidding at today's 10-year note auction.  If this reasoning proves solid, look for mortgage interest rates to finish the day unchanged to perhaps just a touch lower.

The level of mortgage interest rates will also be influenced this week by trading action in the stock markets.  I see reason to believe the Dow will find a bottom (between 8200 and 8130) from which to launch a counter-trend rally before the market close on Friday afternoon.  If my assessment proves accurate, rising stock values will tend to produce fractionally higher mortgage interest rates as investors move capital (out of the relative safety of Treasury obligations and mortgage-backed securities) into riskier but higher yielding investments such as stocks.

The Mortgage Bankers of America released their seasonally adjusted index of mortgage application activity for the week ended July 3^rd this morning.  The MBA's total application index rose 10.9% during the latest reporting period after slumping last week to its lowest level since November.  Refinance applications were up 15.2% while purchase application activity posted a more modest gain of 5.34%.  The average 30-year mortgage rate stayed at 5.34% last week.  That was up from the record low of 4.61% in late March but well below the year-ago mark of 7.04%.   

Today's conforming 30 year fixed rate is at 5.25%.