Daily Commentary by Larry Baer: The
Commerce Department reported earlier this morning that consumer spending slowed
in March despite a slight acceleration in income growth. Consumer spending rose 0.3% last month - the
slowest pace of the year so far. Incomes
posted a slightly better than expected gain of 0.4%. The underlying rate of inflation at the
consumer level (as defined by the personal consumption expenditure component of
this morning's report) showed a modest increase of 0.2%.
Mortgage investors gave today's March Income
and Spending figures little more than a passing glance. Indications of softening economic growth here
at home combined with the bubbling financial crisis in Europe together with
news that Britain has fallen back into recession has built a strong foundation
of support under the prospects for steady to perhaps fractionally lower
mortgage interest rates. The approach of
French presidential and Greek parliamentary elections on Sunday, May 6th
have continue to squeeze additional "flight-to-quality" buying out of
global investors - a process that continues to create solid demand for U.S. dollar denominated assets like Treasury
debt obligations and agency mortgage-backed security
Looking ahead to the balance of the week --
tomorrow morning's Institute
of Supply Management's
Manufacturing index and Thursday's initial weekly jobless claims report will
likely amount to nothing more than a warm-up act for Friday's much anticipated
April Nonfarm Payroll report.
Market participants are currently
anticipating the economy created 175,000 net new jobs in April - a nice
improvement from the 120,000 gain registered in March - but still well below
the 250,000+ pace necessary to just keep up with the number of new entrants
into the workforce. If the actual number
matches or closely approximates the consensus estimate mortgage interest rates
will likely remain fairly steady at current levels. In the off-chance the actual headline number
exceeds 200,000 -- look for surprised mortgage investors to react by pushing
rates aggressively higher.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
