Last week's interest rate improvements were mostly driven by a flight to quality.  As money was flowing out of a weak stock market investors have to find a safe haven which typically means the Credit Markets... Which is where Bonds and Mortgages are traded. As the money flows in, the price goes up which brings the yield down. (in the credit market it is an inverse relationship between price and yield)

This week has been a pretty quiet one so far, we lost a little ground yesterday, but we are probably with in about 1/8% trading range for the whole week.

Thursday is the "biggie" of the week. With the Holiday we have the Non Farm Payroll report for the month of June coming in a day early.  It is anticipated that the economy lost 60,000 jobs, The unemployment rate to be 5.4% and that average Hourly Earnings are up 0.3%.  These are the numbers that are already "priced in" and any deviation in these numbers will move the market.  If by chance there are only 55,000 jobs lost and the UE rate is 5.3%, look for a rapid sell off in the market which will lead to higher interest rates.... Conversely if we see 65,000 jobs loss and a 5.5% UE rate we are likely to see a rally in the market, but I don't anticipate any rally to be "big" since it is a holiday shortened week and the market closes early Thursday (2pm close).

I have typically seen conservative trading just prior to the holiday weekend, Foreign markets are still open July 4th and Trading the day prior will likely be light... and my personal theory is that it is mostly the Jr traders left running the shop on July 3rd, and they don't want to get caught with their pants down and have their bosses yell at them on Monday... So a sharp sell off is more likely than a big rally.

But the market is always right, and I can only make educated guesses! 

Have a great 4th of July Weekend!!! Support our Troops, with out them we would not have a 4th of July!

Rob

Robert Rauf

www.RobertRaufHomeLoans.com