Daily Commentary by Larry Baer: 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 major financial crisis in the region. The financial rope by which the stability of the region is hanging is frayed and fragile -- a minor swing in the wrong direction has the potential of sending the European economy tumbling into the abyss of disaster.
Global investors are clearly expecting a circuit breaker from the European Central Bank to alleviate the rising financial pressure on the 17 euro-zone countries. If no announcement of a major intervention is forthcoming in the days ahead, the situation there could unravel fairly quickly.
If such an event were to occur there is little doubt the ensuing "flight-to-quality" buying spree favoring dollar denominated assets like Treasury debt obligations and mortgage-backed securities would serve to support steady to perhaps fractionally lower mortgage interest rates here in the states. That's the good news. The downside of a potential European financial meltdown is that longer-term such an event would almost certainly push our economy back into the depths of recession - and therein lays the bad news.
Against the backdrop of churning financial headlines from Europe -- news here at home showing consumer prices fell in October for the first time in four months drew little more than a passing glance from mortgage investors. The October Consumer Price Index posted a decline of 0.1% while the so-called core rate, a measure which excludes the more volatile food and energy components, posted a modest 0.1% gain. The crux of this statistical mumbo-jumbo is that inflation pressures at the consumer level remain exceptionally benign.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey for the week ended November 11th. The survey shows overall loan demand dropped 10.0% from the previous week. Refinance requests were off 12.2% while purchase applications were down 2.3%.
The contract rate for 30-year fixed-rate conforming mortgages finished at 4.23%, up 1 basis-point from the prior week and down 10 basis-points from the month ago mark. Refinance applications accounted for 7 out of every 10 mortgage loan applications taken last week.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
