At the beginning of the year, a change was made to allow the Producer Price Index (PPI) to capture a wider range of items. PPI now focuses on the increase in prices of intermediate goods AND services used by companies to produce finished products. Services were not included before this year. One result of the change was to make the data more volatile month to month. Investors likely will look at longer-term trends in PPI, but they may not react much to monthly changes, as was seen today. To determine trends in inflation, investors rely more heavily on the Consumer Price Index (CPI), which measures price changes for finished goods, and the Core PCE price index, which is favored by the Fed.
MBS prices are down 3/32nds this morning. Leading Indicators were released at 10:00 a.m. et and were a little stronger than expected. Last week was another good week for mortgage rates. Mortgage rates fell about 10 basis points during the week. The Fed Beige Book painted a pretty picture for mortgage rates, slow growth and low inflation. CPI confirmed the low inflation part as it reported prices in March rose at a 1.1% annual rate. Volatility continued during the week. Volatility has persisted since the end of the MBS purchase program on March 31st. As the Fed is no longer a consistent big buyer, the market is functioning more naturally and that includes reacting more significantly to economic announcements and changing sentiment. Mitch Kider, of Weiner Brodsky Sidman Kider PC, joined the show to discuss the result of a recent Department of Labor ruling which changes an interpretation of labor laws as it relates to loan originators (LOs) and overtime. The new ruling overrides previous rulings that allowed LOs to be exempt from overtime as they were considered to be performing administrative duties. Now their duties are not considered administrative and the labor laws says, if they do not meet [...]
MBS prices are up nicely this morning, up 9/32nds. No economic data was released this morning. The Dow is also up. It is above 11,000 for the first time in 18 months. Last week was a great week for the mortgage market. MBS prices improved about 24/32nds during the week. Most of the improvement followed a very strong 10 yr Treasury auction. Strong demand and foreign participation fueled a rally in Treasury prices, which spilled over to MBS prices. Also kind to MBS prices during the week were the minutes from the 3/16 Fed meeting. The minutes showed that the Fed was nearly unanimous in their belief that Fed funds rates need to stay very low for an extended time and that inflation was not a concern. Next week will be full of significant economic announcements. On Wednesday both CPI and Retail Sales for March will be released and on Thursday Industrial Production will be released. Glen Corso, Executive Director of the Community Mortgage Banking Project, joined the show to discuss further the need to voice concerns about the 5% risk retention provisions in the current Financial Reform bill before the Senate. Glen described that passage of the bill with [...]