Daily Commentary by Larry Baer: The
German Constitutional Court
is scheduled to issue a ruling related to German financial support for the
euro-zone's new bailout fund on Wednesday.
Not to be outdone, the Federal Reserve may inject a new round of fiscal
stimulus into the U.S.
economy on Thursday. Against the
backdrop of these two major events, most mortgage investors are taking a
"better-safe-than-sorry" attitude and moving to the sidelines. As we wait for definitive answers from the
German's and our own central bank -- the trend trajectory of mortgage interest
rates will tend to move sideways to fractionally higher.
In my judgment, the most mortgage interest
rate friendly scenario this week will include a "strings-attached"
approval from the German court and a decision by the Federal Open Market
Committee to hold off on QE3 while simultaneously extending its conditional
pledge to keep interest rates low through late 2014. Should these two scenarios play out -- it
will be difficult for inflation expectations to rise -- which in turn provides
solid support for the continuing prospects for steady to perhaps fractionally
lower mortgage interest rates on Main
Street, USA. I'm not saying this combination of events
will occur - I'm just saying these combined scenarios will probably prove to be
the most mortgage interest rate friendly outcome we could expect.
Corporate America
does not seem to feel interest rates have much of a chance of moving notably
lower. Yesterday companies poured into
the credit markets to issue $19.5 billion worth of corporate bonds, making it
the third-busiest day on record, according to Informa Global Markets. That's a lot of supply surging into the
credit markets in front of Uncle Sam's sale of $66 billion worth of 3-, 10- and
30-year bonds this week. Thursday's
30-bond auction will conclude at 11:00 a.m. ET - a little more than an hour
before the Federal Open Market Committee announces its monetary policy
decision. It will likely be difficult
for mortgage interest rates to gain much transaction to notably lower levels
until at least Friday when all this incoming supply will have been
absorbed. Heads up.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
