Daily Commentary by Larry Baer: Selling pressure in the mortgage market
developed again this morning as stronger-than-expected jobs data boosted
investor appetite for riskier assets like stocks.
The number of
Americans filing initial claims for unemployment benefits unexpectedly fell
7,000 to a seasonally adjusted 340,000 suggesting a pick-up in the labor
sector. The weekly data fell outside of the survey period for tomorrow's
much more important February nonfarm payroll report. The
stronger-than-expected weekly claims data does seem to indicate the economy is
picking up some steam even in the face of the political stalemate and
sequestration issues spewing out of Washington.
Looking ahead to
tomorrow -- mortgage investors have already priced-in expectations for a
February headline jobs number of 167,000 and a national jobless rate holding
steady at 7.9%. If the actual numbers match or closely approximate the
consensus estimate -- this report will have little, if any, noticeable impact
on the trend trajectory of mortgage interest rates. A headline nonfarm
payroll number greater than 170,000 and/or a national jobless rate of 7.8% or
less is almost certain to push mortgage rates higher.
I think it is worth
at least noting the Fed is still pumping $85 billion per month into the credit
markets. As long as this process continues -- mortgage interest rates
will likely stay within shouting distance of modern historical lows -- and the
stock markets will have a platform from which to launch assaults on new record
highs. The "so what" factor here is of paramount
importance. The stronger the labor sector becomes and the faster the
economic engines spin -- the quicker we will approach the point the Fed will
begin to throttle-back their stimulus programs before withdrawing their
artificial support all together.
Investors live in
the future - not in the present. Pay very, very close attention to
anything that might suggest the Fed is poised to reduce the size of its
stimulus program. Once even a whiff of a suggestion the programs will be
wound down drifts through the markets stock prices will start to wobble and a
threat of a "crash" will grow dramatically. Mortgage interest
rates may actually edge lower temporarily - but the stronger the likelihood of
the curtailment of the Fed's purchases of Treasury debt obligations and agency
mortgage-backed securities become -- the stronger the upward pressure on
mortgage interest rates will be.
All of this is
certainly not an issue today - but don't for a second get complacent and
buy-off on the idea that trees can grow to the sky and governments' can
continue to artificially support economies forever.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
