Commentary: Mortgage interest rates edged lower this morning driven by news that a European Union finance ministers meeting set to take place before tomorrow's much anticipated summit of all EU leaders has been cancelled. Even though the larger body is still scheduled to meet tomorrow - today's cancellation raises doubts in the mind of the global credit market investment community about the ability of European leaders to make meaningful headway in efforts to recapitalize euro-zone banks and to resolve the debt crisis plaguing many countries in the region.
Failure to reach a deal by tomorrow to insure the next sovereign debt default averting payment to Greece (due by the end of the month) will further undermine market confidence in the currency bloc and its collective ability to solve a two-year-long debt crisis. Should such an event occur - look for mortgage interest rates to move sideways to fractionally lower from current levels as capital flows out of Europe and into the relatively safe-haven of dollar denominated assets like Treasury debt obligations and mortgage-backed securities.
The probabilities are also high further delays in making meaningful progress with respect to avoiding a multi-country financial disaster in Europe will take a toll on stock market investors here at home - resulting in a sell-off in both the DOW and the NASDAQ. If such an event were to occur, the "flight-to-quality" buying spree generated by capital fleeing the selling pressure in our domestic equity markets will also serve to support the prospects of steady to perhaps fractionally lower mortgage interest rates.
Uncle Sam will be in the credit market this afternoon looking to sell $35 billion worth of 2-year notes at an auction scheduled to conclude at 1:00 p.m. ET. The relative short maturity of this security should be attractive to a large number of investors. If so, this event will likely have little, if any meaningful impact on the direction of mortgage interest rates today.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
