Rate Update September 15, 2009
In yesterday’s ‘rate update’ I shifted my outlook from a floating to a locking bias. That shift was timely as mortgage rates are slightly higher this morning.
Mortgage rates are higher this morning thanks to two bits of unfriendly data.
First, the Labor Department reported that wholesale prices as measured by the Producer Price Index rose at twice the rate analysts had expected last month. Inflation is the number one driver of mortgage rates so both mortgage-backed bonds & treasury yields are higher this morning.
We’ll learn more about whether this read on inflation is a pattern or an outlier tomorrow when the Consumer Price Index (CPI) is released.
Second, the Commerce Department reported that retail sales increased by more than expected last month. Good news for the economy is typically bad news for mortgage rates especially when it is on the heels of higher than expected inflation figures.
Although these two reports are working against mortgage rates we’re going to shift to a neutral position ahead of tomorrow’s CPI report.
Current outlook: neutral