This morning the labor department released jobless claims and it wasn't pretty. First time jobless claims rose from 484,000 last week to 516,000 which is well above economist's expectations of 482,000. The continuing claims came in at 3.9 million which is the highest since 1983. So loss of jobs continues to be a major problem for our economy. We also got the release of trade balance or should we say trade inbalance? Economist's where expecting a figure of -$56.8 billion, but the actual number came in better at -$56.4 billion. Much of this improvement though can be attributed to lower oil prices. Later today we are also getting another round of a treasury auction of 30yr bonds. The added supply of debt will probably keep mbs in check today and prevent any sizable rally.
Mortgage backed securities improved very nicely yesterday, but so far this morning we have given back about half the gains from yesterday leaving rates relatively unchanged from yesterday. We are fighting tough over head resistance that is preventing a rally with mbs, so it appears that we are stuck in a trading range. All economic reports are pointing toward a very weak economy which usually leads to lower mortgage rates, but we are not in normal times.
Tomorrow we are going to get the biggest report of the week, retail sales. Economists are expecting retail sales to fall -2.1% and when excluding auto sales they are expecting a -1.2% drop. It will be interesting to see how these numbers affects the markets and we will let you know after they are released. Generally a weaker retail sales numbers is good for mbs and lower rates, but just like the jobless numbers today should be good for mbs but we are not seeing any rally. As I have been typing this update, we have improved off the lows of the morning but still well below yesterdays close.