Market Update

This week presents a mixed bag of reports for mortgage interest rates as the EU struggles to resolve debt issues in Greece, Spain, Portugal and Ireland and with a key employment report due Friday. The adage is “bad economic news is good for mortgage rates.” If the job news is “good”, expect mortgage rates to tick up but if the EU can’t quickly address ever-growing concerns about its debtor nations, then rates could remain relatively unchanged or, even improve marginally as large investors would remain vested in the safe haven of US Treasury bonds.
The stock market can’t correct as many want and expect. Every time the indexes fall as they did on Friday, there has been no significant follow-through the next day and while that sort of bad economic news is generally good for mortgage rates as it tends to drive large investors back to the safety and security of bonds, we didn’t see bond yields improve to the extent expected which tells me many investors are still sidelining significant cash (or, hedging in commodities ahead of recovery and inflation) as they wait to see which way the US economy is really headed.
The overwhelming consensus is for continued low rates from the Fed, no inflation and expectations job growth will increase over the coming months. All of which would be good for the economy and mortgage rates provided inflation stays in check since inflation erodes the value of bonds over time. As for the Goldman/Sachs problems, most analysts feel there will be no criminal charges filed by prosecutors and likely only a fine from the SEC. It would be extremely difficult to build a criminal case against Goldman.
“An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”
Laurence J. Peter 

Gary Miller, Century Bank