Daily Commentary by Larry Baer: Trading
activity is light in the mortgage market this morning. My sources tell me the majority of buying
interest is being driven by foreign investors looking for a safe place to park
money on renewed worries about the deepening euro zone fiscal mess.
The European Central Bank announced earlier
today Greek government bonds will not be ineligible for member
banks to use as collateral to borrow from the ECB effective next week Wednesday. Nervousness created by this announcement
spawned a wave of new capital flowing into dollar denominated U.S.
debt obligations, agency eligible mortgage-backed securities and other low-risk
asset classes. Adding to the demand for
these safe-haven investments are nagging concerns about signs of a sharp
slowdown in both the U.S.
and global economies.
All this hand-wringing creates the perfect
foundational support for the near-term prospects for steady to perhaps
fractionally lower mortgage interest rates from your investors.
Looking ahead to the coming week Uncle Sam
will be in the credit markets from Tuesday through Thursday conducting a
three-part, $99 billion, debt auction.
First on the auction block on Tuesday will be $35 billion of 2-year
notes followed by $35 billion of 5-year notes on Wednesday and concluding on
Thursday with the sale of $29 billion of 7-year notes. All three offerings are expected to well
bid. If so, the coming auctions will
probably exert little, if any noticeable impact on the current trend trajectory
of mortgage interest rates.
In terms of economic news Wednesday's release
of the June New Home Sales figures, Thursday's initial weekly jobless claims
report and Friday's first estimate of the second-quarter economic growth rate
will be the featured numbers of the week.
All three reports are broadly expected to be weak - a condition that is
already priced into most of your mortgage investors' rate sheets.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
