Daily Commentary by Larry Baer: Different day -- same old story.
Mortgage interest rates remain hung in a very narrow range as investors adopt a "wait-and-see" attitude in front of this week's three-part Treasury auction. Most market participants are hesitant to make any move until the questions regarding a potential credit default by Greece have been resolved in one manner or the other.
As I mentioned in this week's edition of "Viewpoint" - the impact of a Greek default by itself would likely be minimal - but it is the psychological damage such a default could do to market participants' investment psyche that could cause the global economy to slip back into recession. Until a disorderly financial collapse of Greece (and by extension other weak countries in the euro-zone) is convincingly eliminated as a threat -- global capital will continue to flow into the relative safe-haven of US dollar denominated assets like Treasury debt obligations and mortgage-backed securities - a condition that will tend to be very supportive of the near-term prospects of steady to perhaps fractionally lower mortgage interest rates.
On the other hand, if a firm and viable agreement to save Greece from a major financial meltdown happens to be reached prior to any one of this week's two remaining scheduled Treasury debt auctions - the "flight-to-quality" of European capital into the relative safe-haven of US dollar denominated assets will likely begin to tapper off - resulting in lower prices and fractionally higher mortgage interest rates here at home. I'll keep you posted.
Uncle Sam will be in the credit markets today looking to sell $24 billion of 10-year notes. Yesterday's three-year note offering drew a mediocre bid from global investors, so expectations for ramped-up demand for today's 10-year note offering are small. As I mentioned in the previous paragraph -- soft demand for US dollar-denominated assets like treasury debt obligations will tend to limit the ability of mortgage interest rates to move notably lower. Today's auction will conclude at 1:00 PM ET and I'll post the results on my website as soon as possible once the final gavel falls.
As they do every Wednesday the Mortgage Bankers of America Association has released its mortgage application survey for the week ended February 3, 2012. The composite index, which includes both refinance and purchase loan applications rose 7.5% for the week. This measure of mortgage loan demand is up 22.2% over the past four weeks and is 76% higher compared with the year ago mark. Almost all of last week's gains were driven by continuing strong demand for refinance loans. The Refinance requests rose 9.4% last week, that's up 26.4% from four weeks ago and 122.5% from the year ago level. The Purchase Money component of this Index only managed to eke out a 0.1% gain for the week and is up 2.7% from a month ago levels, but down 3.5% from where it was at this point in 2011.
The national average contract rate for 30-year fixed-rate conforming mortgages finished at 4.05%; down four basis-points from its week ago level down six basis-points from four weeks ago and down 104 basis-points from a year ago.
Refinance applications accounted for 80.5% of all applications and 81.1% of the prospective loan volume currently composing pipelines on a national basis.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
