Daily Commentary by Larry Baer: What a difference a day makes.
Yesterday Greek leaders announced they had clinched a long-stalled deal on financial reforms and austerity measures needed to secure a bailout and avoid a messy sovereign debt default. Today, a couple of those same Greek political leaders are saying they had their "fingers-crossed" and are retracting their consent originally given for the financial rescue package. This fresh political wrangling is injecting more uncertainty into the global credit markets, which has reintroduced the "flight-to-quality" support for steady to fractionally lower mortgage interest rates that had begun to fade after yesterday's optimistic announcement suggesting the Greek debt issue had been resolved.
The greatest influence on the trend trajectory of mortgage interest rates next week will be Greek headlines. If a firm "deal" is not in place by February 15th -- global investors will likely begin aggressively pricing-in expectations the Greek government will fail in their efforts to secure a financial rescue and a Greek bankruptcy will probably be confirmed by March 20th . The ramifications of this event will almost certainly send global investors scrambling for the relative safety of dollar denominated assets like Treasury debt obligations and mortgage-backed securities - a condition that will prove supportive of the prospects for steady to fractionally lower mortgage interest rates in your neighborhood.
The current social unrest and political double-talk prevalent in Greece will cast a long shadow on any announced "deal" - with global investors likely to remain very skeptical of the ability of the Greek government to adhere to the terms of the required austerity program. Against this backdrop mortgage interest rates here at home will probably tend to move sideways in a narrow range -- as investors take a "wait-and-see" attitude before choosing to declare the Greek debt crisis completely averted.
The coming week's economic calendar will feature the release of the January Retail Sales figures on Tuesday followed by last month's Producer Price Index on Thursday and will conclude with the January Consumer Price Index on Friday. Retail Sales are expected to be pretty solid - but much of the gain is anticipated to be the result of price discounting - a condition that most economists believe will be confirmed by the very modest readings for the Producer and Consumer Price Indexes. If this assessment proves accurate, the upcoming macro-economic data should prove to be collectively mortgage interest rate neutral.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
