Daily Commentary by Larry Baer: The
number of Americans standing in line to file first-time claims for government
jobless benefits fell by 12,000 last week.
It was the first drop in this measure of labor market activity since
April. Still, most of the recent
increases in the new jobless claims were rather small and the overall level of
claims has held at a mark consistent with a modest recovery in the labor market
- a condition highlighted by Fed Chairman Bernanke in his testimony to the
Joint Economic Committee of Congress earlier today.
Weak U.S.
employment data last week along with an escalation in the euro zone's crisis
had raised expectations among market participants that Mr. Bernanke and his
fellow central bankers would soon move to launch additional economic stimulus
measures in the form of "QE3."
Mr. Bernanke's tone was far from sounding in crisis mode. While he did say the Fed was monitoring
"significant risks" to the U.S.
recovery from Europe's debt and banking
crisis he stopped well short of implying further monetary policy action from
the central bank was imminent. His
comments stood in sharp contrast to those of Fed Vice Chair Janet Yellen, who
late yesterday, made a public case for further monetary stimulus to insure
against the risk the economy backslides into recession. All-in-all today's testimony by Fed Chairman
Bernanke was a "bust" for those looking for new clues regarding the
likelihood of further accommodative stimulus programs from the central bank
developing in the near-term.
In my opinion Mr. Bernanke and most of his
fellow central bankers probably see the stampede of global investors piling
into the safety of U.S Treasury debt obligations and agency eligible
mortgage-backed securities as a god-send.
This massive flow of capital into U.S. dollar denominated credit
instruments is sending our domestic interest rates to historical lows which is
in-turn providing the Fed with an enormous amount of "breathing room"
to simply stand pat and see how things play out in the economy over the next
couple of months.
If my assessment proves accurate, look for
mortgage interest rates to move largely sideways as credit market participants
register their disappointment with the Federal Open Market Committee's
hesitancy to refill the punchbowl and keep the party to progressively lower
mortgage interest rates going forever.
As I mentioned in this space yesterday -- my
timing algorithms are suggesting mortgage interest rates will likely begin a
more sustained move to higher levels sometime between June 21st and
the end of July. For the time being
investors will be reluctant to begin aggressively reducing their safe-haven
investments in dollar denominated assets like U.S. Treasury debt obligations
and agency eligible mortgage-backed securities before results of the Greek
elections on June 17th are known and the Fed has concluded its Open
Market Committee meeting on June 20th. Until then, expect mortgage interest rates
here at home to chop nervously back and worth in a relatively tight range.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
