Commentary: The credit markets are bracing for this afternoon's $32 billion 3-year note sale. Nervousness over rising commodity prices, worries that the Fed may be acting too slow to curb inflation pressures and the compounding effects of $10 to $15 billion of higher yielding corporate bonds on the auction block this week are all serving to push mortgage interest rates fractionally higher in the day's early going. That's the bad news.
The good news is that the relatively short duration of these three-year notes together with a yield at its highest level in six months should combine to draw a reasonably strong bid from investors. If so, this event will likely prove to be supportive of steady mortgage interest rates. In order to push mortgage interest rates fractionally lower today -- the three-year note auction will need to draw blockbuster demand. While such an outcome is certainly possible - it is not very probable. I'll provide today's auction result on my website as soon as bidding concludes at 1:00 p.m. ET.
Uncle Sam will be back in the credit markets tomorrow looking to borrow $24 billion of 10-year notes and will conclude this week's borrowing spree with the sale of $16 billion of 30-year bonds on Thursday. Macro-economic news will be limited to Thursday's 8:30 a.m. ET initial weekly jobless claims report and the December Wholesale Inventory data at 10:00 a.m. ET the same day. In my judgment yields across the whole spectrum of the credit markets have risen to high enough levels that these three offerings should draw decent demand. If so, look for mortgage interest rates to move sideways -- with a slight potential to creep fractionally lower should bidding at the auctions prove stronger-than-expected.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
