The trend trajectory of mortgage
interest rates will likely once again be most influenced by
news from Libya and other hot spots of civil unrest in the
Middle East.
Traders and investors around the world will nervously wait to
see if Friday’s “Day of Rage” protest in Saudi Arabia actually
develops. The world’s second largest oil producer has so far
escaped the unrest roiling through North Africa and much of
the Middle East.
As the week progresses mortgage investors will be keeping
one eye on trading activity surrounding the Treasury’s three part,
$66 billion debt auction -- and the other wary eye will be
constantly monitoring oil prices.
Some analysts argue that the brewing unrest in Saudi Arabia
will drive more foreign investors to this week’s Treasury
auction. If so, the increased demand for high-quality dollar
denominated fixed-income assets will almost certainly prove
supportive for the prospects for steady to perhaps fractionally
lower mortgage interest rates. Others say that the threshold
of safe-haven demand has already been reached. If this
assessment proves accurate, mortgage interest rates will be
vulnerable to a move to higher levels. The “tilt-point” here
will likely be determined by the trend trajectory of oil prices.
It is a close call -- but my pricing models are suggesting Light
Crude will trade in the 104.50 to 106.50 price range this
week (last Friday’s close was 104.42). If my projections
prove accurate, the probabilities will continue to lean slightly
in favor of the near-term prospects for steady to perhaps
fractionally lower rates.
