Daily Commentary by Larry Baer: Persistent doubts about Greece's financial future continues to provide background support for the near-term prospects for steady to perhaps fractionally lower mortgage interest rates. Many analysts believe the deep Greek recession and unpredictable elections yet to come this Spring threaten to turn the biggest debt restructuring in history into yet another financial disaster. Greece's poor track record in implementing reforms under their first bailout agreement means there will be very limited patience on the part of their euro-zone financing partners if the Greeks fail to abide by the terms of this second bailout agreement. This situation is far from resolved - which by extension means the flow of European capital into the relative safe haven of Treasury debt obligations and mortgage-backed securities will continue for the foreseeable future - a condition sure to be supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates.
This week's $66 billion borrowing spree by Uncle Sam kicks off with a 3-year note auction today, followed by the sale of $21 billion of 10-year notes tomorrow and wraps-up with the sale of $13 billion of 30-year bonds on Wednesday. That's a pretty health amount of supply coming into the credit markets - especially considering corporate America will splashing around be in the credit markets as well this week - looking to break last week's record sale of $40.39 billion worth of investment-grade corporate bonds. If investors begin to suffer a little bit of indigestion trying to absorb all of this supply -- chances are mortgage interest rates may edge fractionally higher as a result.
The labor picture has now improved enough that Chairman Bernanke and the other members of the Federal Open Market Committee will likely choose to delay action on providing additional financial stimulus to the economy in the form of "QE3" mortgage-backed security purchases at their upcoming meeting tomorrow, Tuesday, March 13th. Most investors have already priced in this assessment into their rate sheets - so the event itself will likely prove anti-climatic with respect to the current trend trajectory of mortgage rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
