Commentary: Credit market participants are mesmerized by the European debt crisis, with its dozens of moving pieces, and its potential to topple governments, banks and to deliver a massive financial shock to the global economy. The systemic threats produced by this continental dilemma have actually reinforced the safe haven appeal of U.S. dollar denominated assets like Treasury debt obligations and mortgage-backed securities - a condition exceptionally supportive of steady to perhaps fractionally lower mortgage interest rates. That is the good news.
Market rumors and speculation insinuating the countries composing the European Union may be on the verge of taking meaningful action to substantially reduce the likelihood of a broad based financial meltdown in the region is largely behind the upward pressure that has developed on mortgage interest rates since last week Friday. The likelihood that Greece will ultimately default on its sovereign debt is essentially already "baked-into-the cake" as far as most investors are concerned. If the disaster can be limited to Greece - as many analysts believe is possible - the European economy will likely recover at a decent pace. Against such a backdrop - one of the primary anchors holding U.S. mortgage interest rates at multiple decade lows will begin to slip. Such an event is not likely to occur in the next day or so - but if the probabilities begin to favor such an event occurring within the next three to six months - the upward pressure on mortgage interest rates will intensify. As I have mentioned in this space many times - mortgage investors live in the future, not the present. Heads up.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
