Daily Commentary by Larry Baer: This week's three-part $99 billion Treasury debt
auction and the entire battery of macro-economic reports scheduled for release
over the coming five business days will take a distant back-seat to the tone
and tenor of the "fiscal cliff" negotiations in Washington.
There are only 36 days until the automatic legislative triggers are tripped
launching $600 billion of government spending cuts and tax increases onto the
back of an already struggling economy. Most analysts believe a failure to
resolve this issue by midnight on December 31st dramatically
increases the likelihood the economy will plunge into another recession by
mid-2013.
Optimism among
market participants that Democrats and Republicans will be able to set aside their
respective party's political agenda and craft a bi-partisan agreement has waned
a little this morning. The longer it takes for a compromise resolution to
be achieved and the more belligerent the debate becomes - the stronger the
near-term support for steady to perhaps fractionally lower mortgage interest
rates will become. That is good news.
The bad news - at
least in terms of the trend trajectory of mortgage interest rates -- is the
almost certainty that once the "fiscal fog" clears, the stocks markets
will likely begin a strong rally -- producing noticeable upward pressure on
mortgage rates in the process.
From a technical
perspective it appears mortgage interest rates will likely trend sideways to
fractionally lower between now and the week ended Friday, December 21st.
From that point forward the probabilities begin to strongly favor the idea
mortgage interest rates are poised to begin a slow, but progressive move higher
- confirming the growing assumption the lowest mortgage rates in modern history
were set during the last five trading days of September, 2012.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
