Commentary: A closely watched measure of inflation pressure at the consumer level posted its biggest rise in nearly three years in May. The Labor Department said this morning that the headline Consumer Price Index posted a month-over-month gain of 0.2% last month. Investors shrugged, assuming most of the increase was the result of sharply higher energy cost during the period. Investors weren't nearly so nonchalant when they noticed the core rate of inflation, a value which excludes the more volatile food and energy prices, increased a surprising 0.3%, the largest gain since July 2008. Most observers had expected the core CPI, which is closely watched by the Federal Reserve, to rise a more modest 0.2%.
The mortgage market swooned immediately following the stronger-than-expected inflation news. This early selling pressure faded quickly as a weak New York area manufacturing report, inline May Industrial Production and Capacity Utilization figures and rising worries Europe won't agree on a new aid package in time for Greece to avoid a sovereign debt default ignited a "flight-to-quality" buying spree that is driving capital out of riskier assets into the perceived safe-haven of Treasury debt obligations and mortgage-backed securities.
As they do every Wednesday, the Mortgage Bankers of America have release their Mortgage Application Survey for the week ended June 10th. According to the MBA, overall demand for single-family mortgage financing was up 13% from the prior week. The purchase index rose 4.5% while the refinance index posted a week-over-week gain of 16.5%.
The average contract rate for 30-year fixed rate mortgages finished at 4.51%, down 3 basis points from the week ago mark, down 9 basis points from four weeks ago, and down 31 basis points from the a year ago. Seven out of every ten applications taken last week were refinance requests.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
