Daily Commentary by Larry Baer: European Central Bank President Mario Draghi
fell well short of expectations he was going to deliver a plan of substance
focused on relieving the crippling sovereign debt crisis in the euro-zone. Credit markets in the region soared on
optimism following bold public comments Mr. Draghi made last week about
throwing the financial power of the ECB behind a euro rescue effort.
Earlier today he was much meeker when he
announced the 23-member Governing Council has yet to reach a final agreement on
any course of action.
Global credit market participants registered their
bitter disappointment by selling government debt issues of affected countries
in the region and reinvesting those proceeds in the relative safe-haven of U.S.
dollar denominated assets like Treasury debt obligations and agency-eligible
mortgage-backed securities. This
"flight-to-quality" strategy from European investors will very likely
remain in place until at least September when Germany's
Constitutional Court
will rule on challenges to German participation in the euro-zone's permanent
rescue fund. All-in-all this is a global
credit market condition that will continue to provide support for the prospects
for steady to perhaps fractionally lower mortgage interest rates here on Main
Street, USA.
News earlier this morning that U.S.
weekly jobless claims rose less than economists had forecast, climbing 8,000 to
365,000, elicited little mortgage investors reaction. The weekly data is currently considered
distorted due to seasonal adjustments related to auto plant model-year
retooling shutdowns. Starting next week
the data should be clear of this influence.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
