Daily Commentary by Larry Baer: The remaining two Treasury auctions on this week's economic calendar (today's $35 bil. 5-year note sale and tomorrow's $29 bil. 7-year note sale) will exert the largest single influence on the trend trajectory of mortgage interest rates -- at least through tomorrow afternoon at 1:00 p.m. ET when the final gavel falls on the sale of $29 billion worth of 7-year notes.
In yesterday's ABC News on-the-record interview, Fed Chairman Bernanke said it is too soon to declare victory in terms of the budding economic recovery. Mr. Bernanke welcomed a decline in the unemployment rate and signs financial strains in debt-stricken Europe were easing. Asked whether the Fed was considering taking further action to stimulate economic growth, Bernanke said the central bank had not taken any option off of the table.
If it was Mr. Bernanke's intent to try to "jaw-bone" interest rates lower - he was at least partially successful. Investors responded to the Fed Chairman's warning to avoid becoming complacent by nudging mortgage interest fractionally lower. But the power of "jaw-boning" by the Fed has it limits -- and chances are the mortgage market is rapidly approaching that mark -- at least on a short-term basis. Heads up.
