Daily Commentary by Larry Baer: The economic calendar is vacant today which means follow-through trading action spawned by Friday's wildly weaker-than-expected March Nonfarm Payroll report and renewed concerns Europe may be tilting back into recession are the two primary drivers behind today's rally in the mortgage market.
U.S. employers added 120,000 new jobs last month - just a little less than half of the 200,000 jobs most market participants had expected. It was the slowest month for job creation since October of last year.
Signs of a worsening situation in Europe as Spain and other euro-zone countries struggle to meet their budget targets are creating a "flight-to-quality" flow of capital out of riskier asset classes like stocks into safe-haven assets like dollar denominated Treasury debt obligations and mortgage-backed securities.
Looking ahead to the balance of the week -- Uncle Sam will be in the credit markets from Tuesday through Thursday looking to borrow $66 billion in the form of 3-year and 10-year notes together with 30-year bonds. Weakness in Friday's employment data together with the likelihood growth in China and Europe will show signs of slowing will probably combine to provide solid demand from foreign investors for these offerings.
The inflation story here at home will be told through the release of the March Producer Price Index on Thursday followed by the March Consumer Price Index on Friday. Overall inflation is expected to remain benign but continuing high energy prices may soon cause a shift in this outlook. Assuming both inflation reports match current expectations the data is unlikely to exert a significant influence on the current trend trajectory of mortgage interest rates.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
