Daily Commentary by Larry Baer: There was nothing of significance on the economic calendar today so mortgage investors are largely taking directional cues for mortgage interest rates from trading action in the stock markets. Higher stock prices tend to drag mortgage interest rates fractionally higher while lower stock prices often prove supportive of steady to perhaps fractionally lower mortgage interest rates.
Credit market participants will also keep a wary eye on news headlines from Europe as the financial drama there is unfolding almost on an hour-to-hour basis. Global investors are fleeing the euro zone bond market, European banks are dumping euro-zone government debt and deposits are draining from south European banks. The majority of all that money is finding its way into dollar-denominated assets like U.S. Treasury debt obligations and mortgage-backed securities. As long as the European debt crisis continues it will almost single-handedly allow mortgage interest rates here in the states to hover near record all-time lows. That is the good news.
The bad news is that once global investors sense the European debt crisis is approaching a conclusion - whether that conclusion involves a recasting of the countries allowed to participate in the single currency -- or the implementation of a major overarching financial rescue of some design for all the euro-zone countries - it will be virtually certain you and I will have been witness to the coming and going of the lowest single-family mortgage interest rates available in our country over the last 50 years. While such an event is not imminent - it is important to bear-in-mind that fixed-income investors the world over live in the future - not the present -- and in their world perception is a far stronger driver of interest rate movement than is fact.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
