Daily Commentary by Larry Baer: The Greek government is within shouting distance of concluding a bond swap deal with their private creditors that is desperately needed to stave off a messy sovereign debt default. As I write the Greeks have commitments from over 60% of their private bond holders - there is growing optimism they will reach the minimum target of 75% approval before the expiration of today's deadline at 3:00 p.m. ET. The European Union and the International Monetary Fund have made a successful bond swap a pre-condition for final approval of the 130 billion euro ($170 billion) rescue package Greece needs to avoid economic collapse. An official preliminary announcement of the results of the Greek bond exchange program is expected around 1:00 a.m. ET tomorrow morning.
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.
If the Greek government is successful in their bond swap 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 today -- 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
