Daily Commentary by Larry Baer: Mortgage interest rates are feeling a little
minor upward pressure this morning.
The first real
movement in the "fiscal cliff" talks began yesterday, with House
Speaker Boehner edging slightly closer to President Obama's key demands as they
work to avert the steep tax hikes and federal spending cuts set to take effect
unless Congress intervenes by midnight on December 31st.
Boehner has proposed
extending low tax rates for everyone who has earned less than $1 million, and
rates would rise for wages above that. Obama wants the tax to be
effective on households earning $250,000 or more.
The question now
boils down to what President Obama offers in return. Such major
questions, still unanswered so close to the end of the year, are making it
increasingly unlikely the "fiscal cliff" issue will be resolved
before the deadline.
The pace of activity
and media spin could pick up over the coming week but time is running out to
craft a comprehensive deal that will satisfy both Democrats and Republicans.
Bear-in-mind if/when
a political compromise is reached to avoid the "fiscal cliff" --
stocks will likely rally at the expense of rising mortgage interest rates (as
long as the deal is something more than a simple extension of the current
deadline). Until/unless a fiscal agreement is achieved - a primary
support for steady to perhaps fractionally lower mortgage interest rates will
remain firmly in place.
Looking ahead to the
coming week - Uncle Sam will dominate the pre-holiday credit market with a three-part
auction featuring $35 billion of 2-year notes today, $35 billion of 5-year
notes on Tuesday and $29 billion of 7-year notes on Wednesday. $99
billion is a lot of supply landing at year-end - a condition that may cause
investors to be Scrooge like and drive prices lower (yields higher) at this
week's debt sale. If so, a series of soft Treasury auctions will not
likely have much impact on the current level of mortgage interest rates - but
mortgage investors will likely be more stingy than usual with the prices they
are offering. November Existing Home Sales figures on Thursday will
highlight an otherwise sparsely populated economic calendar.
Economic data may
cause a temporary little flutter in the market - but any substantial shift in
the current trend trajectory of mortgage interest rates will almost certainly
be tied to events surrounding the looming "fiscal cliff".
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
