Daily Commentary by Larry Baer: The
mortgage market is once again the beneficiary of global investors' skepticism
will respect to European financial leaders' ability to make meaningful progress
in solving the regions debilitating debt crisis. Hopes are fading that a meeting of finance
ministers, scheduled for Thursday and Friday, will produce any substantive
measures to tackle the looming financial disaster for several of the members of
the single-currency union.
The trend trajectory of mortgage interest
rates here in the states remains firmly "joined-at-the-hip" with the
rise and fall of "flight-to-quality" flows of capital from the global
credit markets. Currently those capital
flows are rising which is contributing strong foundational support to the
prospects for steady to perhaps fractionally lower mortgage interest rates from
your investors.
Speaking of investors -- the majority of them
shrugged off news from the Commerce Department this morning indicating new-home
sales were higher by a strong 7.6% in May.
Historically low mortgage interest rates and a 0.6% drop in the median
new-home sales price were cited as the primary driver behind the improved May new-home
sale pace.
Looking ahead to the balance of the week --
Uncle Sam will be in the credit markets looking to borrow $99 billion over the
course of a three-day period stretching from Tuesday through Thursday. The Treasury Department will sell $35 billion
of 2-year notes on Tuesday, $35 billion of 5-year notes on Wednesday and will
wrap-up the coming week's borrowing spree with the sale of $29 billion of
7-year notes on Thursday.
Also on tap this week will be the release of
the May Durable Goods Orders data on Wednesday, and the weekly jobless stats
and the final revision of the Q1 Gross Domestic Product figure on
Thursday. The release of the May
Personal Income and Spending data will round out the macro-economic news for
the week on Friday.
Trading activity in the stock markets will
likely be the strongest single determinant of mortgage interest rate direction
over the course of the week. Lower stock
prices will tend to support steady to lower mortgage interest rates while
higher stock prices will probably drag mortgage interest rates higher.
My models are currently indicating the stock
markets may be poised to begin a short but rather powerful short-term
counter-trend rally, probably not later than Thursday or Friday. It is unlikely a rally in the stock markets,
should it actually develop, will prove strong enough to meaningfully eclipse
the markets recent highs (12,898 for the Dow and 4459 for the Nasdaq) - but any
noticeable improvement in the equities markets will make it difficult, if not
impossible, for mortgage interest rates to move notably lower in the near-term.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
