LONG-TERM TREND (6 days or more) Tilted slightly in favor of lower rates

 Commentary:  Trading activity is light in the mortgage market this morning.  Mortgage interest rates are hung in a very narrow range as investors adopt a “wait-and-see” attitude in front of this week’s three-part Treasury auction.  Most market participants are hesitant to make any move until the questions regarding a potential credit default by Greece have been resolved in one manner or the other.

As I mentioned in this week’s edition of “Viewpoint” – the impact of a Greek default by itself would likely be minimal – but it is the psychological damage such a default could do to market participants’ investment psyche that could cause the global economy to slip back into recession.  Until a disorderly financial collapse of Greece (and by extension other weak countries in the euro-zone) is convincingly eliminated as a threat -- global capital will continue to flow into the relative safe-haven of US dollar denominated assets like Treasury debt obligations and mortgage-backed securities – a condition that will tend to be very supportive of the near-term prospects of steady to perhaps fractionally lower mortgage interest rates.

On the other hand, if a firm and viable agreement to save Greece from a major financial meltdown happens to be reached prior to any one of this week’s three scheduled Treasury debt auctions – the “flight-to-quality” of European capital into the relative safe-haven of US dollar denominated assets will likely begin to tapper off – resulting in lower prices and fractionally higher mortgage interest rates here at home.  I’ll keep you posted.