Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – November 12, 2009

25-40-50-Day Moving Averages

As I write, Mortgage-Backed Securities (MBS) are sitting directly on the 25, 40, & 50-Day Moving Averages.  All three averages are sitting almost at exactly the same place.  We, actually, dipped below those lines, however, have rebounded and are awaiting the 30-Year Treasury Auction report. 

Auction Results Will Effect Rates

The 30-Year Treasury Auction should not fare too well.  At the cost of sounding pessimistic, it’s just difficult to have foreign investors like a longer term, when investing in these bonds.  However, to be fair, the 3-Year and 10-Year Treasury Auctions have fared well this week.  This is a somewhat encouraging sign. 

Jobless Claims Getting Better…BUT…

The other news pushing bonds and MBS down is the fact the government reported the number of workers filing new claims for jobless benefits dropped by 12,000 last week.  The four-week moving average of new claims, considered a better gauge of underlying trends, fell by 4,500 for the period.  During the latest week for which data is available (week ended October 24^th) enrollment in extended benefits programs decreased by 28,240 while the Emergency Unemployment Compensation program enrollment rose by 22,400 (somewhat offsetting the decrease).  So, while the media continues to paint a brighter picture of the labor market, I don’t see it.  Particularly coupled with the fact that the new legislation signed by Obama will extend unemployment benefits for the people not working full time.  This will definitely change the outlook of the continuing claims numbers.  We’ll keep an eye on this…

Locking

I think its prudent to lock.  Even with the level of support we have directly under us…I don’t see the 30-Year Treasury Auction surprising us, and the Labor Statistics are being received as joyous information by the media.  Stocks will benefit at the expense of bonds. 

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