Daily Commentary by Larry Baer: Treading
water.
Traders are simply treading water this morning
as they await the results of today's $35 billion 2-year Treasury note
auction. In the interim, market
participants will keep one eye on the political headlines streaming out of Europe. A major shift in political power in many of
the countries in the region may signal compliance with the terms of recently
completed financial bailout agreements may fall short of current
expectations. These unsettled conditions
are continuing to support a flow of capital out of the euro-zone and into the
relative safe-harbor of U.S. dollar denominated assets like Treasury debt
obligations and agency eligible mortgage-backed securities.
Here at home the Census Bureau reported this
morning the pace of new home sales unexpectedly fell 7.1% in March. On its face that doesn't sound too good - but
the 13% upward revision to the February number together with a 3% upward
revision to the January data brought the pace of new home sales in the
first-quarter of 2012 up to an annualized 16% compared to the last three-months
of 2011. The number of homes available
for sale declined slightly, and the median house price edged up 6.3% on a
year-over-year basis. Mortgage investors
shook their collective heads at the wide data revisions and shrugged the whole
thing off.
Still ahead this week -- Friday's
first-quarter Gross Domestic Product report will take a distant backseat to the
release tomorrow afternoon of the Federal Open Market Committee's post-meeting
statement that will be followed in short order by the release of the Fed's official
economic forecast and will conclude the same afternoon with a press conference
by Fed Chairman Bernanke. Thursday
morning's initial weekly jobless claims report will draw lots of attention as
mortgage investors debate whether to nudge rates lower because the economy is
beginning to cool again - or whether to nudge rates higher because economic
growth is on the threshold of another expansion phase.
Scattered among this very active week of
economic news and events the Treasury Department will be conducting a
three-part auction. Uncle Sam will look
to sell $35 billion of 2-year notes at an auction that concludes at 1:00 p.m.
ET today, $35 billion of 5-year notes tomorrow and $29 billion of 7-year notes
on Thursday.
The mortgage market has been nestled in a
very sleepy 46 basis-point (14/32nd) trading range this week - but
that condition will be vulnerable to a rude adjustment over the coming three
business days. Heads up.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
