Commentary: The mortgage market is the direct beneficiary of a sell-off in the stock markets and global concerns related to economic issues connected to the continuing nuclear crisis in Japan. The flow of funds out of riskier assets into the relative safe haven of dollar denominated assets like short-term Treasury debt obligations and mortgage-backed securities could not have come at a better time.
Uncle Sam will be splashing around in the credit markets over the course of the next three days looking to borrow $66 billion dollars. He will sell $32 billion worth of three-year notes today through an auction process that will conclude at 1:00 p.m. ET. The process will be repeated tomorrow with the sale of $21 billion worth of 10-year notes and the government will wrap the whole thing up on Thursday with the sale of $13 billion worth of 30-year bonds.
Current domestic and global economic concerns will likely produce sufficient demand from the world's fixed-income investment community to cause each of this week's debt offerings to go off without a hitch. If so, these debt auctions will not noticeably influence the current trend trajectory of mortgage interest rates.
I continue to believe trading activity in the stock markets will be a major "X-factor" in terms of the trend trajectory of mortgage rates over the course of the coming week. Higher stock prices will tend to put upward pressure on mortgage interest rates while falling stock prices will probably prove supportive of steady to fractionally lower mortgage interest rates.
My models are suggesting the further we get into April - the more difficult it will likely be for the Dow and NASDAQ to sustain their move to higher prices. I am currently projecting the Dow will "top out" in the neighborhood of 12,550 on or about, Friday, April 15th. The NASDAQ seems to be setting up in a similar manner -- with a projected "top" in the neighborhood of 2,890 coming sometime between Wednesday, April 13th and Friday, April 15th.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
