Commentary: Is the porridge too hot - or too cold?
Mortgage investors are having a difficult time trying to answer that question in terms of the appropriate level for mortgage interest rates.
On the one hand, the pace of economic recovery appears to be cooling a bit. The Institute of Supply Management released their March Service Sector Index figures earlier this morning - and the data was weaker than had been expected. The overall measure of activity in the sector of our economy that accounts for more than 66% of all enterprises and employs as much as 80% of all American workers -- fell for the first time in seven months. The Service Sector index fell to 57.3% last month from 59.7% in February. In the tangled world of credit market influences this morning's report falls in the mortgage market friendly bin.
On the other hand, news that China's central bank raised short-term interest rates this morning for the second-time this year has combined with the likelihood the European Central Bank will nudge their short-term interest rates higher on Thursday to make credit markets uneasy. Federal Reserve Chairman Bernanke stirred the mix with comments he made last night when he said the Fed will be monitoring rising domestic prices and inflation expectations closely. Against the global interest rate tightening background - all it took to make many credit market participants weak in the knees was the word "inflation" crossing the lips of the Chairman of the Federal Reserve. The mere discussion of the potential of a hike in the Fed's benchmark short-term interest rates has the potential to turn-up-the-heat on the prospects of higher mortgage interest rates ahead.
Against the push and pull of the current macro-economic background I believe trading activity in the stock markets will likely be the factor that tilts the trend trajectory of mortgage interest rates decidedly in one direction or the other. 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.
Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
