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Archive for PPI

Inflationary Concerns Holding Back Mortgage Bonds

We had a lot of news out today, all of which was bad.  The Retail Sales report came out today at a 0.1% rise over last month.  This is considerably lower than the projected 0.4% increase, and the lowest increase since the February Retail Sales Report.

The Producer Price Index (which measures wholesale inflation) came in at 1.8% on a seasonally adjusted basis in June.  This is not good news for inflation, and as the biggest gain since November 2007, it will continue to chip away at investor confidence in the mortgage bond sector.

FED Chairman Ben Bernanke will be delivering his semi-annual monetary outlook to the Senate Banking Committee today.  The expectations for his prepared speach are already creating concerns with investors and causing a sell off in stocks based on the assumption that continued problems with growth and unemployment will not ease in the near future.

All of this leads to a less than stellar environment in mortgage bonds.  Normally, a stock sell off is good news for the bond market and mortgage rates in general.  But with continued uncertainty about inflation, it is having little or no affect on bonds.  My suggestion would be to lock your rate at current levels to protect against future loss on any active mortgage loan you have working.

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Tuesday May 20, 2008

Producer Price Index (PPI) Puts Pressure On Mortgage Bonds

Mortgage bonds are feeling pressure today from the Core Producer Price Index, a leading inflationary indicator, which came in at twice what was forecast.  The PPI for April came in at 0.2% which is half of the 0.4% projected, and significantly less than the 1.1% reported in March.  This is putting pressure on mortgage bonds in spite of the stock market remaining sluggish today.

Crude Oil prices set another all time high, AGAIN, last night at $127 per barrel.  This increase was likely “fueled” by OPEC’s refusal to increase oil production to meet increasing demands.  No more significant economic news is expected out today, so if the stock market continues to be sluggish, bonds will likely reap the benefits later in the trading day.