Daily Commentary by Larry Baer: With just over a day to go before the Greek government must meet a bond exchange deadline necessary to secure a 130 billion euro international financial rescue package - the latest commitments from the banks, pension funds and other private investors who must agree to the terms of the bond swap has brought the aggregate total of bond holders signing off on the deal closer to the two-thirds majority needed to ensure a Greek sovereign debt default is averted.
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 highly probable 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.
The Greeks have until 2:00 p.m. CT tomorrow to get at least 75% of their bond holders to agree to take a loss of almost 75% of their original investments, in return for new Greek bonds. If the Greek government is successful in this endeavor, look for a little of the "flight-to-quality" buying of U.S. dollar denominated Treasury debt obligations and mortgage-backed securities to dry up - a condition, should it occur, almost certain to cause mortgage investors here in the states to nudge mortgage interest rates fractionally higher.
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.
As the do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey for the week ended March 2nd. The composite index, reflecting both refinance and purchase loan demand, dropped 1.2% because of a second consecutive weekly decline in the refinance index. The refinance index fell 2.0% from the previous week and is now at its lowest level since January. Purchase loan applications rose 2.1% last week, extending the rebound from the prior week.
For perspective, the composite index is down 6.9% over the past four weeks but it is still up 51.2% from this same time period a year ago. Refinance activity accounted for 77% of all single-family mortgage applications taken last week and represent 75% of all pending loan volume.
The contract rate for 30-year fixed-rate conforming mortgages finished at 4.06%, down by 1 basis-point from its week ago level, up 1 basis-point from four weeks ago, and down by 94 basis-points from the year-ago mark.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
