Daily Commentary by Larry Baer: The dog days of August are upon us as
investors hunker down in their financial bunkers waiting on the outcomes of key
central bank meetings next month.
The prospects for steady to potentially lower
mortgage interest rates will be heavily influenced by further central bank
intervention. As I write, most observers
anticipate the Fed and the European Central Bank will launch new bond purchase
programs when they both meet in September.
In my judgment these two meetings should be viewed with a bias toward
the old market adage that says, "Buy the rumor and sell the fact."
The uncertainty surrounding the run-up to the
injection of additional monetary stimulus into the U.S.
and European economies will continue to support the
"flight-to-quality" buying of U.S. dollar denominated assets like
Treasury debt obligations and agency eligible mortgage-backed securities - a
mortgage interest rate friendly "thing" if ever there was one.
Even though the launch of another round of
bond purchases by the two central banks may initially be enough to nudge
mortgage interest rates lower - the longer term impact of these events will
increase the upward pressure on rates (especially if the moves prove successful
in terms of stimulating an acceleration in economic growth).
Nothing on this week's economic calendar is
likely to create much of a stir in the mortgage market.
Tuesday's Producer Price Index and
Wednesday's Consumer Price Index are expected to show modest upticks in their
headline numbers as a result of slightly higher food prices resulting from the
devastating drought in the country's farm belt states - a condition already
priced into most of your investors' rate sheets.
Be patient - be disciplined - and play it by
the numbers outlined above.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
