Daily Commentary by Larry Baer: As expected, Fed Chairman Bernanke strongly
defended the central bank's quantitative easing programs during this testimony
before the Senate Banking Committee earlier this morning. Mr. Bernanke
left no doubt in anyone's mind that the benefits of the programs have clearly
exceeded possible costs. The Fed Chairman told members of the Senate
Banking Committee Fed policymakers are keenly aware of potential risks from
their extraordinary support for the economy and reassured them the Fed has all
the tools it needs to retreat from its monetary support positions in a timely
and controlled fashion.
Mr. Bernanke went on
to urge lawmakers to avoid the sharp spending cuts set to go into effect on
Friday because the cuts, combined with earlier tax increases, would create
"significant headwinds" to an economy already struggling to gain
traction. The Senators nodded gravely and then returned to their iPads to
finish making travel reservations for their next taxpayer sponsored junket to
some exotic world destination. Sorry -- I made that last part up - excuse
me just a moment while I climb down off of this soapbox and get back to
finishing this morning's commentary.
In other news of the
day the government reported new home sales soared 15.6% in January - it was the
fastest sales pace since the summer of 2008. The month-over-month gain
was the largest since the early 1990's. The supply of homes at the
current sales rate dropped to 4.1 months, the lowest since March 2005.
Newly constructed homes accounted for about 7.0% of the residential market in
2012. Mortgage investors largely shrugged off today's rock solid
new home sales report. If the robust new home sales trend continues
through the end of February -- look for mortgage investors to begin to nudge
mortgage interest rates fractionally higher.
Uncle Sam will be in
the credit markets this afternoon looking to sell $35 billion of 5-year
notes. Foreign investors are expected to be stronger bidders at this
auction than they have been over the past couple of months as yesterday's
voting results in Italy
revive concerns related to the survivability of the single currency European
Union. If so, decent demand at today's Treasury note auction should prove
supportive of the prospects for steady to perhaps fractionally lower mortgage
interest rates. The auction will conclude at 1:00 p.m. ET and I'll post
the result on my website as soon as possible once the final gavel falls.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
