Daily Commentary by Larry Baer: The risk, however slim, that the United
States might default on its sovereign debt if
it does not raise its borrowing limit in the next few weeks will probably build
a short-term ceiling over mortgage interest rates. Global investors see
the political squabbling surrounding the expansion of the nation's borrowing
limits as temporary. The political pushing and shoving is certainly a
distraction - but it does not diminish the fact the U.S. debt market is one of
the safest places on earth to park cash - a condition that proves solid support
for the prospects of relatively steady if not fractionally lower mortgage
interest rates for the foreseeable future.
The ceiling
currently holding mortgage interest rates down may soon get some reinforcement
from the stock markets. My models continue to flash signals suggesting
the stock markets are poised for a sizeable sell-off - which may begin was
early as the coming week. If so, look for capital flowing out of riskier
asset classes like stocks to follow the well-worn path back into the safe harbor
of Treasury debt
obligations and agency-eligible mortgage-backed securities. The stronger
the stock market sell-off -- the greater the prospects for fractionally lower
mortgage interest rates.
The coming week's
economic calendar will feature December Existing Home Sales at 10:00 a.m. ET on
Tuesday, January 22nd and December New Home Sales data at 10:00 a.m.
on Friday, January 25th . Both reports are expected to show
reasonable but not outstanding consumer demand. It is highly
unlikely either data set will induce a significant shift in the current trend
trajectory of mortgage interest rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
