PPI strong and Mortgage Rates Suffer

Empire State Index | Reported 0.6% | Est -16.0 | Prior -22.2 | MODEST

Producer Price Index [PPI] | Reported 1.1% | Est 0.4% | Prior 0.3% | MODEST

Core PPI [CPPI] | Reported 0.2% | Est 0.2% | Prior 0.5% | MODEST

Relatively-Hot PPI numbers reported due to the highest fuel  and food prices in 17 years.  The Core-PPI was at expectations of .2%.  The Empire State Survey was still weak, but better than expectations… and as usually the Bond Market reacted negatively -53bp currently. 

Tomorrow the very important Consumer Price Index will be reported.  CPI and Core CPI are significant inflation measures that could force the Mortgage Bond market below the solid support of both the 50 and 100 day moving averages.  The next level of support is the 200 day moving average -133bp below.  This could push mortgage rates up to the mid 6’s again, even with perfect credit.  With this risk and the rumored continued tightening of mortgage insurance companies coming in the near future, if you have an approval, I’d lock it.

Grau Perspective | 30F 5.750% 7/1A[Int Only] 5.375%

Chicago PMI | Reported 48.2 | Est 46.7 | Prior 44.5 | ELEVATED

The Chicago Purchasing Managers Index for March reported above estimates.  The survey results signal more economic restraint and concern about the health of the economy.  Mortgage Bonds have not reacted much to the news, currently we are +3bp on the day.  Henry Paulson the Treasury Secretary is currently speaking about more mortgage reform and regulation requirements for our industry.   This week is full of ELEVATED economic reports.  Hold on to your hats!

ISM Index | Reported [Tue 4.1] | Est 48.2 | Prior 48.3 | ELEVATED

ADP Employment Report | Reported [Wed 4.2] | Est -23,000 | Prior -23,000 | ELEVATED

Crude Inventories | Reported [Wed 4.2] | Prior 88,000 | MODEST

Initial Jobless Claims | Reported [Thu 4.3] | Est 360,000 | Prior 366,000 | MODEST

ISM Services Index | Reported [Thu 4.3] | Est 49.2 | Prior 49.3 | MODEST

Unemployment Rate | Reported [Fri 4.4] | Est 5.0% | Prior 4.8% | ELEVATED

Hourly Earnings | Reported [Fri 4.4] | Est 0.3% | Prior 0.3% | ELEVATED

Average Work Week | Reported [Fri 4.4] | Est 33.7 | Prior 33.7 | ELEVATED

Non-Farm Payroll | Reported [Fri 4.4] | Est -40,000 | Prior -63,000 | ELEVATED