Daily Commentary by Larry Baer: 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.
Uncle Sam will be in the credit markets
looking to borrow $99 billion over the course of a three-day period stretching
from today through Thursday. The
Treasury Department will auction off $35 billion of 2-year notes this afternoon
at 1:00 p.m. ET, $35 billion of 5-year notes on Wednesday and they will wrap-up
this 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 followed by 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 remaining four business days. Lower stock prices will tend to support
steady to lower mortgage interest rates while higher stock prices will probably
drag mortgage interest rates fractionally higher.
My models are currently indicating the stock
markets may be poised to begin a short-lived but rather powerful 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 probably 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
