Tuesday, December 8, 2009

Global stock markets fell hard earlier today as pessimistic news reports trumpeting details of a resurgent credit crisis in Dubai and a major downgrade in the sovereign debt of Greece sent foreign stock investors scrambling to park capital in the relative safe haven of U.S. debt obligations and mortgage-backed securities. This "flight-to-quality" buying spree in the government debt and mortgage market is a welcome but likely temporary development.

Uncle Sam will be in the credit markets today looking to sell a stack of 3-year notes worth $40 billion. The auction will conclude at 1:00 p.m. ET and is expected to be well bid - hopefully setting the stage for an equally well bid $21 billion 10-year note sale tomorrow and a $13 billion 30-year bond offering on Thursday. Look for today's auction to exert little, if any meaningful influence on the trend trajectory of mortgage interest rates.