Daily Commentary by Larry Baer: Trading activity in the mortgage market is fairly light this morning as mortgage investors continue to tweak their risk management strategies in front of Friday's much anticipated February nonfarm payroll report.
Selling pressure in the stock market -- created by renewed worries Greece may not be able complete a bond exchange with private creditors before a 2:00 p.m. CT deadline on Thursday, March 8th -- is providing major support to the prospects of steady U.S. mortgage interest rates today.
If too few private bond holders participate in the planned Greek bond swap, the stage will be set for a very messy Greek sovereign debt default. The overriding concern is that a financial tsunami that originates in Greece will sweep rapidly into other euro-zone countries and ultimately lead to sharply diminished economic growth across the globe. It is difficult, if not impossible, to layout all of the potential ramifications of a disorderly Greek debt default with a high degree of precision - but for our purposes - it is highly probably a failure by the Greek government to complete this next step in their debt restructuring effort will produce a substantial swoon in the U.S. stock markets - which in-turn will generate the necessary momentum to push U.S. mortgage interest rates to yet lower levels.
Within hours of the formal announcement regarding the success or failure of the Greek bond swap - the Labor Department will release their February nonfarm payroll figures at 8:30 a.m. on Friday, March 9th.
Given the Greek's get their bond swap deal done on Thursday -- here's the breakdown on Friday's nonfarm payroll in a "nutshell."
Most economists anticipate February nonfarm payrolls grew by 210,000 while the national jobless rate held steady at 8.3%. If the actual nonfarm payroll number matches or exceeds this projection -- look for mortgage interest rates to edge higher as stock prices climb. On the other hand, if the actual February headline payroll number posts a reading of 180,000 or less and/or the national jobless rate rises to 8.4% or more -- look for stock prices to fall sharply -- a condition virtually certain to prove supportive of steady to perhaps fractionally lower mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
