Daily Commentary by Larry Baer: The
slight upward pressure on mortgage interest rates this morning is being created
almost exclusive by concerns investors have with regards to this afternoon's
sale of $29 billion worth of 7-year notes by the Treasury Department. Demand for the notes may be tested by their
low yield, which earlier this morning touched 1.128%. In my judgment, much of the
"flight-to-quality" buying spree related to the European debt crisis
has probably run its course. Credit
market investors live in the future - not the present. Unless events in the euro-zone unfold in some
currently unforeseen manner -- it is unlikely capital will continue to cascade
into U.S. dollar denominated assets like Treasury debt obligations and agency
mortgage-backed securities as it has in weeks past. Yields can only fall so far before investors
begin to feel compelled to look elsewhere for a
"bigger-bang-for-their-buck."
A weak 7-year note auction today will tend to nudge mortgage interest
rates fractionally higher. My personal
opinion is the investment community will exhibit strong enough demand for
today's offering to prevent any noticeable shift in mortgage interest rates -
but subsequent sales will likely require Uncle Sam to
"sweeten-the-pot" by bumping up yields - a event, should it occur,
almost certain to push mortgage interest rates higher as well. Today's debt sale will conclude at 1:00 p.m.
ET and I'll post the result on my website as soon as possible thereafter.
Initial claims for state unemployment
benefits slipped 2,000 to a seasonally adjusted 370,000 during the week ended
May 19th according to Labor Department figures released earlier this
morning. Claims have barely budged in
the past four weeks indicating a marginal improvement in the pace of job
creation after April's disappointing 115,000 gain in the broader nonfarm
payroll figure.
In a separate report the Commerce Department
said durable goods orders (items manufactured to last three years or more) rose
0.2% in April after dropping 3.7% in March.
While the headline figure for the April Durable Goods Orders was
stronger than expected - the details of the report suggest the manufacturing
sector, other than autos, will probably be lethargic for much of the
summer. Excluding transportation, orders
fell 0.6%. Business spending plans fell
1.9% after dropping 2.2% the prior month.
It looks more and more like business are hesitating to invest in face of
the uncertainties in the U.S.
and global economy.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
