Daily Commentary by Larry Baer: Trading activity in the mortgage market is light
once again this morning as investors prepare to absorb $72 billion of new
Treasury debt offerings. Uncle Sam will sell $32 billion of three-year
notes today, followed by $24 billion of 10-year notes tomorrow and $16 billion
of 30-year bonds on Thursday. Each auction will conclude at 1:00 p.m. and
I will post the result on my website as soon as possible once the final gavel falls.
In my judgment there
is a reasonable chance bidding may be better-than-expected at this week's
Treasury auctions. If President Obama does not provide convincing
rhetoric in tonight's State of the Union address indicating the White House and
Congress are well on their way to avoiding the automatic spending cuts
scheduled to be triggered on March 1st - look for selling pressures
to intensify in the stock markets to the direct benefit of lower interest
rates. Should the spending cuts outlined in the first phase of this so
called "sequestration" plan actually be implemented - it would likely
create a 30 basis point hit to the pace of economic growth as measured by Gross
Domestic Product. I strongly doubt many people have a slump anywhere close
to that size currently penciled into their stock or bond valuation models.
This week's economic
calendar is sparsely populated with tomorrow morning's 8:30 a.m. ET release of
the January Retail Sales report dominating Thursday's weekly jobless claims
data and Friday's Industrial Production and Capacity Utilization figures.
The directional
trend of mortgage interest rates for the balance of the day and over the course
of the coming week will be most influenced by trading activity in the stock
markets. Lower stock prices will tend to support steady to perhaps
fractionally lower rates while higher stock prices will likely exert some
modest upward pressure on mortgage interest rates.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
