Good Afternoon,
Hopefully you read this morning’s market update and took advantage of the mortgage interest rates because the 10-year bond has started to respond to the high inflationary numbers released at 8:30am.
Here’s the inside Dripp…
These are the final Producer Price Index (PPI) numbers from this morning:
- Consensus (PPI – M/M change): 0.5% / Actual: 1.2%
- Consensus (PPI less food and energy): 0.2% / Actual: 0.7%
Prices have surged at the fastest pace for producers since 1981. Ouch! Take a look at the 10-year bond yield below. Mortgage interest rates will most likely rise again today if this upward trend continues. The good news is that oil and gas prices have eased some of the inflationary concerns to a certain degree, but when you look at the overwhelming PPI figures it’s easy to dismiss that news.
Simply Put: There are many aspects of the economy that affect mortgage interest rates, such as inflation, unemployment, corporate earnings and loan defaulting rates, to name a few. Today, a very important index that measures wholesale prices for producers/manufacturers showed a huge increase, which communicates to us that our country’s economy is experiencing very high levels of inflation. Since mortgage interest rates are tied to the bond market and inflation is the number one enemy of the bond market, we should start seeing another increase in rates today and tomorrow. However, the decrease in oil and gas prices can help to soften the inflation blow, so a harsh spike on interest rate is not likely, but the slow upward trend is.
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