The Day Ahead: QEII Purchase Schedule, Trade Balance, Jobless Claims

Interest rates are continuing to trek higher while equity futures are pointing lower ahead of a busy schedule of macroeconomic data and events.

The 5-year Treasury note is -4/32 at 9929 yielding 1.273%. The 10 year Treasury note is -17/32 at 99-05 yielding 2.722%. The FNCL 4.0 is -4/32 at 102-18.

S&P 500 futures are -2.25 at 1,203.50 and Dow futures are dpwn 19 points at 11,294.

Light crude oil is +0.06% at $86.77 per barrel and gold prices are up 0.71% at $1,401.80 per ounce ― yet another record high.

New data today includes the week’s key event ― the monthly trade deficit ― as well as the Treasury’s budget statement and the weekly jobless claims report (released  day early because of Veterans Day tomorrow).

In the just-released MBA Mortgage Applications index, mortgage loan application volume advanced 5.8% in the week ending Nov. 5.

Refinancings led the increase with a 6% gain, and purchases also gained 5.5%, marking the third straight gain.

The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.28%.

“The increases in purchase applications we have seen over the past couple of weeks align with the better than expected news from October’s employment report and other data indicating some improvement in the economy’s growth prospects,” said Michael Fratantoni, MBA’s Vice President of Research and Economics. 

Not all data has been positive though. Last Friday’s pending home sales index showed contracts for secondary market sales fell 1.8% in September, versus the +3% forecast. That drop was the first since June, leaving the index nearly 25% below last year’s levels.

“Mortgage purchase applications have remained unchanged at very low levels since mid-Summer,” noted economists at Nomura on Tuesday. “Although the stabilization suggests the post-tax credit bust in home sales is probably over, the lack of recovery indicates overall home sales may remain depressed for some time.”

Key Events Today:

8:30 ― Initial Jobless Claims averaged 455k per week in October, compared with 458k in September and 487k in August, so the trend is definitely improving. With last week’s monthly employment report beating expectations and sending equities to new heights, there could be extra attention on how many claims turn up in the week ending Nov. 7. 

A sustained level below 450k is consistent with net private job growth, according to economists at BTMU, and this week the consensus forecast is precisely at 450k. Some economists look for as few as 440k, while the high end of the range is just 455k. 

Meanwhile, continuing claims ― a tally of those still receiving regular jobless benefits ―fell 42k to 4.340 million in the week ending Oct. 23. 

8:30 ― The U.S. Trade Balance is expected to narrow slightly in September to -$45.5 billion, according to the consensus call from Reuters. One factor helping reign in the gap is a decline in both volumes and value of petroleum products. The prior month’s deficit expanded more than $4 billion to $46.4 billion, as a 0.2% gain in exports wasn’t enough to keep pace with the 2.1% jump in imports. Total exports were $153.9 billion; total imports were $200.2 billion worth of goods and services.

“Following the August surge in imports, businesses will want to avoid overstocking and we expect a drop in consumer goods and autos imports,” said economists at IHS Global Insight. “On the export front, increased aircraft exports should partly offset declines for industrial supplies and capital equipment exports. Looking into the fourth quarter, we expect trade to become a boost to growth as import growth slows and a weaker dollar supports U.S. export competitiveness.”

2:00 ― The Treasury Budget Statement for October 2010 should record a monthly deficit of $153.5 billion, according to economists polled by Reuters. Big as that gap is, it’s a reduction from the $176 billion hole seen one year before, so it may not be a bad start to the new fiscal year.

The total budget gap for the fiscal year ending last month was $1.29 trillion debt, or 8.9% of GDP, according to Bloomberg, which notes that the October deficit has averaged$53.6 billion over the past decade.

Treasury Auctions:

• 1:00 ― $16 billion 30-year Bonds