Market Analysis

Below is Larry Baer's market update today.  Larry Baer run a service called Market Alert:

Larry Baer:  The mortgage market is trading quietly this morning as the details of the government's February borrowing plans fell within investors expected range. The Treasury Department's $67 billion refunding next week came in at the low end of analysts' forecast. Uncle Sam will look to borrow $32 billion in the form of 3-year notes next Tuesday followed by $21 billion in the form of 10-year notes on Wednesday and concluding with $14 billion in the form of 30-year bonds on Thursday.

At this juncture it appears the government will need to borrow as much as $2.5 trillion in fiscal 2009 to cope with a recession together with economic stimulus and financial rescue plans already on the table. The more the government moves to borrow the country into prosperity -- the more its sovereign debt will likely fall in price. T.J. Mata, founder and market strategist with Marta on the Markets, uses the analogy of life boats picking up survivors. The more they pick up, the more they sink. As you already know -- when prices in the credit markets fall - interest rates move higher -- not lower.

For the time being the Federal Reserve's warning, first made in December, that it may step in and buy longer-dated Treasuries is preventing yields on debt obligations - and mortgage interest rates - from moving sharply higher. Eventually the Fed may find investors demanding that the central bank either "put up - or shut up" on this issue -- but for the time being simply "talking-the-talk" seems to be getting the job done - and that's good enough to help hold mortgage interest rates relatively steady.

In other news of the day the Institute of Supply Management announced their survey of conditions in non-manufacturing businesses, a segment that makes up almost 90% of the economy, rose to a reading of 42.9 in January from the 40.1 level in December. Most analysts had anticipated the gauge would fall to 39.0. Mortgage investors took note of the stronger-than-expected performance for this measure of economic activity - but remain relatively unconcerned since one month of improved performance does not a trend make.

For those that may be interested - the Mortgage Bankers of America announced that their measure of overall loan applications volume posted an increase of 8.6% on seasonally adjusted basis during the week ended January 30th. The MBA said refinance application rose 15.8% during the period while purchase applications slipped 11.2% from week earlier levels.