Commentary: Mortgage investors largely shrugged off this morning's January Retail Sales report from the Commerce Department. The data showed overall retail sales posted a lower than anticipated gain of 0.3% -- both on an overall basis and excluding the more volatile auto sales component. The majority of credit market participants seemed to feel the data was heavily distorted by a major winter storm that buffeted much of the country during the reporting period.
As I mentioned in this week's edition of ViewPoint - the near-term trend trajectory for mortgage interest rates hinges on the current pace of inflation - both at the factory gate and on Main Street.
As I write market participants expect tomorrow's Producer Price Index (released at 8:30 a.m. ET) to show an overall gain of 0.8% driven by higher food and energy prices -- while Thursday's Consumer Price Index (released at 8:30 a.m. ET) is projected to show a composite gain of a more modest 0.3%. As long as the actual values for these two big inflation reports match or fall below their respective forecast mortgage interest rates will likely move sideways to perhaps fractionally lower. That's the good news. The bad news is that if one, or both, of these reports exceed the consensus estimate -- mortgage investors will almost certainly be quick to push mortgage interest rates higher.
In my opinion this is not the time to aggressively take mortgage market risk. Be patient - be disciplined - and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
