Daily Commentary by Larry Baer: Part of the current selling pressure in the
mortgage market is being driven by the release of two stronger-than-expected
economic reports earlier this morning.
The Labor Department
got the ball rolling when they released their weekly initial jobless claims
data. The report showed the number of Americans standing in line to file
first-time jobless claims fell a dramatic 37,000 during the week ended January
12th. The outsized drop pushed the seasonally adjusted weekly
jobless claims figure to 355,000 - its lowest level since January 2008.
Today's data sent many economists back to the drawing board to make upward
revisions to their forecasts for the much more important January nonfarm
payroll report scheduled for release on Friday, February 1st.
Residential
construction soared ahead of expectations in December, with housing starts and
building permits turning in their best performances since 2008.
Combined with
concerns surrounding the political battles developing in Washington related to
raising the nation's debt ceiling -- today's solid economic news induced a
round of profit taking among mortgage investors.
Speaking of the debt
limit -- the media is really starting to ramp-up their efforts to dramatize
this issue - so before things get too carried away -- I think a little
historical perspective might help put this event into perspective.
The debt limit was
originally created in 1917, when Congress and President Woodrow Wilson
authorized the Treasury to issue long-term securities to finance entry into
World War I. Since 1960, Congress has raised or revised the limit 79
times, including 49 times under Republican presidents. The U.S.
has never defaulted on its debts -- and has more than sufficient incoming
revenue on an annual basis to cover its debt repayment requirements multiple
times over.
The political
pushing and shoving and dramatic story lines related to the legislative
exercise of raising the Federal debt limits has everything to do with partisan
politics and positioning -- and virtually nothing to do with the potential of a
sovereign debt default by the United States. If the global investment
community truly believed the United
States has even a remote chance of defaulting
on its debt -- you can "take-it-to-the-bank" your borrowers would not
be considering financing opportunities today than include access to the lowest
mortgage interest rates in modern history.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
