Daily Commentary by Larry Baer: The number of Americans standing in line to collect first-time jobless benefits from the government declined by 50,000 during the week ended January 14th, the best performance of this measure of the health of the labor market since April 2008. The data leaves little doubt the labor market is healing, but most seasoned mortgage investors believe the improvement is not as robust as today's report might otherwise suggest. The number of weekly jobless claims usually gyrates wildly in January due to seasonal volatility issues created by the rise and fall of hiring during and after the Thanksgiving through Christmas holiday period. A more accurate picture of the health of the labor market will likely develop as we get into mid-February. Mortgage investors gave this data little more than a passing glance as they went about the business of setting today's rates.
The Commerce Department released their December Consumer Price Index statistics earlier this morning. The overall pace of inflation at the consumer level was flat last month. Stripping out the food and energy components, the so called "core-rate" of inflation rose a very modest 0.1% in December. The mortgage market friendly numbers contained in this report were a virtual match with mortgage investors' expectations -- completely eliminating any potential the data might drive rates lower.
The upward pressure on mortgage interest rates today appears to be coming largely from news the International Monetary Fund will seek to more than double its existing war chest by raising $600 billion to help European countries deal with the financial crisis there.
The global investment community is also harboring hopes that talks between the Greek government and its creditors will be successfully in avoiding a complete credit default. The stakes could not be higher. The two sides must thrash out a deal within days to pave the way for Greece to receive a new infusion of aid to avoid bankruptcy when about $18.5 billion (in U.S. dollar terms) of bond redemptions fall due in March. The two sides are still widely apart on the terms of the transaction - but the penalty for failure to hammer out a deal is so great for the participants involved in the talks that most observers believe a workable deal will be reached - perhaps before the weekend is over. If so, the massive flow of capital out of Europe into safe-haven investments live U.S. dollar denominated debt instruments and mortgage-backed security will likely slow to a trickle - and mortgage interest rates here a home will begin to slowly tick higher as a result.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
