Daily Commentary by Larry Baer: It appears many mortgage investors have already transitioned into the holiday mode. Trading volume is low, and there is just so much uncertainty out there most investors don't want to mess around and make bold bets by pushing note rates sharply lower from current levels.
Uncle Sam will be in the credit markets from today through Wednesday looking to borrow a total of $99 billion in the form of 2-, 5- and 7-year notes. These auctions will conclude at 1:00 p.m. ET each afternoon and I'll post the results as soon as possible once the final gavel falls. The 2-year note, because of its very short duration will likely go off without a hitch.
The other two offering are expected to draw decent demand as unsettled financial and political conditions around the globe continues to push capital into the relative safe-haven of dollar denominated assets like Treasury debt obligations. I'm a little more skeptical than most analysts in terms of demand for the 5- and 7-year notes this time around. My technical models are suggesting both of these two securities are fast approaching a price point many domestic and global investors may consider to be too "rich" (high). If either the 5- or 7-year note auctions draw softer-than-expected demand look for mortgage investors to defensively nudge mortgage interest rates higher.
Mortgage investors will likely pause just a moment to take a look at Wednesday's Existing Home Sales figures, and Thursday's final guesstimate of third-quarter Gross Domestic Product. The very few traders still at their desk on Friday will probably barely notice the November Personal Income and Spending and New Home Sales figures before racing out of the door to get an early start on the three-day Christmas Holiday. The mortgage market will close early at 2:00 p.m. ET on Friday and will remain closed on Monday, December 26th.
In my judgment, the potential for notably lower mortgage rates into the end of the year is fading at an accelerating pace.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
