Uncle Sam will be thrashing around in the credit markets one more time today - looking to peddle a $32 billion stack of 7-year notes as he wraps up this week's three-part $118 billion borrowing spree. Tuesday's $44 billion 2-year offering and yesterday's 5-year note sale attracted solid demand. If today's 7-year note offering is equally well received this event will have little if any direct impact on mortgage interest rates.
There is a slight chance we might even see a little "relief-rally" in the credit markets as traders celebrate the fact that it will be another two weeks before they have to deal with supply issues from Uncle Sam once again. That's the good news. The bad news here is that a trembling, weak-kneed auction for today's 7-year offering will almost certainly result in a noticeable upward swing in mortgage interest rates. While such an outcome is certainly possible - it is not very probable.
In other news of the day Senate Majority Leader Harry Reid said the Senate may hold a final vote on Ben Bernanke's nomination to serve a second four-year term as Federal Reserve chairman. Market participants are far more comfortable with the devil they know - as opposed to the devil they have yet to meet. (Just so we are all clear here - the preceding was simply a turn of a phrase - not a suggestion I believe Mr. Bernanke to be an evil spirit drifting around in the financial markets.) It probably won't last long - but Mr. Bernanke's confirmation will likely spawn a short-lived price rally as market participants demonstrate their approval of the Senate's decision.
Mortgage investors responded to today's December Durable Goods Orders gain of 0.3% and the 8,000 headcount decline in the initial jobless claims figure for the week ended January 23rd with little more than a disinterested yawn and a shoulder shrug.
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