Tag: oct 15 2015 rate update

Mortgage rates continue to trade sideways.

We know that the Fed is waiting for signs of inflation before they proceed with raising short-term interest rates.  So will inflation begin to rear it’s head anytime soon?

Yesterday, the Producer Price Index (PPI), which reports on price pressure in the wholesale/ manufacturing level of our economy, was tepid.  When you strip out volatile food & energy prices the core PPI increased by only .8% year-over-year.  Following the release of the report the yield on the US 10-year treasury note fell to 1.98%.

Today, the Consumer Price Index (CPI), which reports on price pressure at the retail level of the economy, was a little livelier but still below the Fed’s target of 2.00%.  The headline CPI figure fell by .2% from last month.  When you strip out volatile food and energy prices year-over-year prices increased by 1.9%.  On a side note, based on the results in this report social security recipients will not be receiving a cost of living adjustment for 2016 (this is only the third time in the past 40 years this has happened).

From a technical perspective rates now look vulnerable to a modest increase.  The last two times that the yield on the US 10-year touched 2.00% o below they moved higher in the following trading sessions.

Current Outlook: locking

Mortgage rates are unchanged to start the week.  The bond market was closed yesterday in recognition of Columbus Day.  Stocks did trade on Monday but were mostly flat.

Global influences continue to support a low interest rate environment here in the US.  A report out of China today showed that both imports and exports decreased in the world’s 2nd largest economy.  In Germany a survey of sentiment dropped substantially potentially signalling continued weakness in the Eurozone.  Bad news for the global economy tends to drive rates lower here at home.

The economic calendar here in the US is fairly busy this week.  On Wednesday we’ll get the Producer Price Index and Retail Sales, on Thursday we’ll get the latest reading on the Consumer Price Index, and on Friday consumer sentiment and industrial production.  As we know inflation is a hot topic because it’s the missing ingredient for the Fed to begin raising short-term rates.

From a technical perspective interest rates look like they could improve modestly although we can’t lose sight of the fact that we’re presently at 2015 low levels.  I will switch to a floating bias.

Current Outlook: floating bias