Daily Commentary by Larry Baer: The Treasury is
set to auction a total of $99 billion of two-, five- and 7-year notes this
week. The upcoming supply is serving as
a pretty stiff headwind to any attempt by mortgage interest rates to move lower
today.
Most mortgage
investors will also choose to "keep-their-powder-dry" as the members
of the Federal Open Market Committee gather for a two-day meeting on Tuesday
and Wednesday. Market participants
largely agree the Fed is almost certain to hold off from making any new
monetary policy moves at the upcoming meeting, opting instead to monitor the
impact of their freshly launched "QE3" initiative. The nation's central bankers are highly
likely to favor keeping a very low profile prior to the presidential election
on November 6th .
Trading action in
the stock markets will probably prove to be the strongest single determinant
influencing the trend trajectory of mortgage interest rates this week. Higher stock prices will tend to drag
mortgage rates higher while lower stock prices will generally be supportive of
steady to perhaps fractionally lower rates.
For what it is worth
-- my models are suggesting a strong level of support for the Dow exists at, or
very near 13,300 (as I write the Dow is trading at 13,324). If that support level fails to contain recent
selling pressures -- expect the Dow to slip pretty easily down to the
neighborhood of 13,000 before the momentum might reasonably be expected to
shift in favor of the buyers. A downward
breech of the support at 13,000 opens the door for a drop into the 12,400 range
before sellers might consider taking a brief pause to catch their breath. If part, or all of these scenarios play out
-- the likelihood mortgage rates will move notably lower is strong. That is the good news part of this
story. The bad news is the psychological
impact a stock market tumble of this magnitude would have on prospective
borrowers will probably result in reduced loan demand even in the face of
steady to lower mortgage rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
