Uncle Sam will be splashing around in the credit markets over the course of the next three-days looking to borrow $98 billion in the form of 2-, 5- and 7-year notes. The knowledge the Federal Reserve is waiting in the wings to buy Treasury debt obligations should assure that investor demand for these offerings will be solid. If my assessment proves accurate, the Treasury Department's three-part auction schedule this week will likely provide just enough distraction for investors that mortgage interest rates will remain flat - at least through the conclusion of the 7-year note auction at 1:00 p.m. Thursday, March 26th.
From a technical perspective there are reasons to believe the recent rally in the stock market is living on borrowed time before a fairly sharp round of profit-taking develops to push the value of the Dow back down into the 7300 to 7100 value range. A swoon in the stock market of this magnitude, should it develop, will tend to be supportive of steady to fractionally lower mortgage interest rates. If such an event is going to occur - I think it will manifest itself no later than Friday, March 27th or Monday, March 30th.
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