Commentary: Credit market participants are milling around this morning with their hands in their pockets waiting for the Treasury Department to wrap-up this week's three-part auction series. Today's $16 billion 30-year bond offering may require the government to "sweeten the pot" a little by bumping up the yield just a bit. If so, look for mortgage interest rates to creep fractionally higher as well. I will post the auction result on my website as soon as possible once the final gavel falls at 1:00 p.m. ET today.
This morning's rapid-fire round of macro-economic news proved to be a "mixed-bag" in terms of the trend trajectory of mortgage interest rates. April Retail Sales, April Producer Price index and the weekly claims for unemployment benefits came in not far off expectations. The "fly-in-the-ointment" with respect to the outlook for yet lower rates appeared in the form of the hotter-than-expected core rate inflation at the producer level. This measure of inflation pressures at the factory gates (a value that excludes the more volatile food and energy components) rose 0.3% for the second month in a row. Most analysts had been anticipating a more modest 0.2% increase for the core rate of the April Producer Price Index. Should raw material costs continue to rise at this pace - businesses will soon have no choice but to pass through the increase to the consumer in the form of a retail price hike.
Mortgage investors will be keenly focused on tomorrow morning's release of the April Consumer Price Index. If the core rate of inflation (excluding food and energy costs) for the man on Main Street exceeds 0.2% -- the potential for yet lower mortgage interest rates will likely dim considerably. Heads up.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
