Commentary: New day - same old story.
Traders continued to be mesmerized by the swirl of activity, political as well as financial, surrounding the 11th hour efforts by euro zone countries to prevent a sovereign Greek debt default. The financial rope by which Greece is hanging is frayed and fragile -- a minor swing in the wrong direction has the strong potential of sending their economy tumbling into the abyss of disaster. The fear in the global credit market is that a failure by Greece to pay its debt holders (which include major European Banks and some big U.S. banks) will create a run on the global banking system reminiscent of the panic created by the collapse of Lehman Brothers. If the Greeks outright default on their sovereign debt -- look for a tidal wave of capital from European banking centers to wash into the relative safe-harbor of dollar denominated assets like Treasury obligations and mortgage-backed securities. This is a scenario, should it develop, sure to be supportive of steady to perhaps fractionally lower mortgage interest rates. Even if the Greeks get a major infusion of capital to keep the financial wolf from the door for the near term - many doubt the government and the people of Greece have the will to live by the draconian measures necessary to overcome the country's massive deficit -- so this issue will continue to overshadow the credit markets for some time yet to come. I'll keep you posted as each chapter of this story unfolds.
Also worth watching -- trading activity in the stock markets will likely exert some strong directional influence on the trend trajectory of mortgage interest rates this week. Higher stock prices will tend to nudge mortgage rates higher while falling stock prices will likely prove supportive of steady to perhaps fractionally lower mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
