Last week we saw a pretty stagnant couple of days with a little bit of up on Tuesday and a little bit of Down on Wednesday and Thursday, leaving us pretty much unchanged by time Friday morning came along. The markets seemed to be waiting on the Employment report to sink their teeth into for some direction. Friday's Employment report came in looking pretty darn strong with oodles of new jobs, the rate dropping to 9.7%... but if you dug just a little you could see that over 400k of the new jobs created were census workers (temps basically) and there was almost NO hiring in the private sector. So the good news number was actually bad news, and if you read my blogs at all you will know that bad news is good news for interest rates and we ended the week with a gain of 21/32nds for Fannies keeping fixed rates for highly qualified buyers in the high 4% range.

This week starts off a little slow and has a good mix of data to chew on and some auctions to mix things up along the way. Here is this weeks calendar:

• Monday June 7: No news day and in the absence of any economic data we have a pretty flat market that started off slightly negative and is now slightly positive for the day.
• Tuesday June 8: Auction # 1 of the week with $26 Billion in 3 year notes. Most of the shorter term auctions have been fairly well bid, I anticipate we will see the same this week and this will most likely be supportive of steady rates.
• Wednesday June 9: April Wholesale Inventories expected up 0.6%. Snooze factor here, no one really cares about an April number in June, not likely to be a market mover.
• Wednesday: Auction #2 with $21 Billion in 10 year notes. Normally I would be concerned over this much supply in a longer term note, but the flight to quality we have seen that has dropped rates to levels we have now seems to still be there with the concerns in Europe, I expect we will see demand for this as investors (foreign and domestic) look for a safe place to park their cash. This will probably lead to a steady market for the day.
• Wednesday: Fed releases its Beige Book. This report puts together the 12 districts of the Federal Reserve. There are some glimmers of hope and improving economy in the reports, but employment remains in the ugly range so it will likely overshadow any signs of improvement in this report. This is not a likely market mover.
• Thursday June 10: Jobless claims for last week expected down 5,000. This would put the number at almost 450,000. above 400k is still very recessionary, so it is supportive of steady to possibly lower rates.
• Thursday: Auction #3 with $13 Billion in 30 year bonds. Same comments here as yesterdays 10 year... Most likely will be well bid in a flight to quality.
• Friday June 11: Retail Sales expected +0.2% Ex Auto +0.1%. If we are shocked here by a stronger than expected number we will likely see a sell off that would give back all of the gains we saw last week. As forecast it is supportive of steady to possibly lower rates.
• Friday: April Business inventories expected +.5%. This is a case where April is not Ho-Hum.  If this number comes in lower than expected it is a sign that business needs to stock up, that would be positive news for the economy and we would see rates climb on that news. If it comes in as reported it will be the 'ho-hum' we would expect from an April Number.

We continue to benefit from Stock market woes and the insecurities in Europe. Investors seem to be continuing to pull out of equities, currency and European debt and tossing it in a safe place to weather the storm. Luckily the USA and the Dollar are considered a safe haven to park cash. This has benefited us in the form of a flight to quality which is likely to keep rates low for the short term. BUT... this flight to quality can disappear in an instant.  No one really likes to put money in a 3 year note at 1.1% or a 10 year at about 3%, Investors want more.  The parking of cash in a flight to quality is not for the yield, it is to preserve cash. Once investors confidence is restored the cash will flow back out of our credit markets faster than it went in causing rates to jump overnight.  That being said, Just lock in- we are at generational lows right now and the greedy will get hurt here.

Have a great week

Rob

Robert Rauf

Mortgage Banker

NMLS ID# 248937

www.RobertRaufHomeLoans.com   or my blog: http://activerain.com/blogs/rrauf

(732)223-1630 x102

Since 1987 I have been helping my clients fulfill their dream of home ownership!

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