Morning Report: Yields rise on strong hot PPI

Vital Statistics:

S&P futures3913-14.4
Oil (WTI)65.82-0.036
10 year government bond yield 1.60%
30 year fixed rate mortgage 3.2%

Stocks are lower this morning on no real news. Bonds and MBS are down.

The stimulus bill is signed and checks could start hitting bank accounts as early as this weekend.

Still nothing as far as guidance out of Fannie and Freddie regarding exactly how the investment limits are going to work. The MBA is supposedly aware and concerned, but that is about it. Note that the last time Fannie and Fred introduced a massive policy change (the adverse market fee), they ended up delaying it a few months so lenders could clear out their pipelines.

Unfortunately, Fan and Fred interpret the directive differently, and I am hearing that even different reps in the same company are giving different advice.

The Producer Price Index rose 0.5% MOM and 2.8% YOY, which is much higher than the Fed’s 2% inflation target. Ex-food, energy and trade services, it rose 0.2% MOM and 2.2% YOY. While one print of the PPI doesn’t mean inflation is back, bonds don’t like it and yields are up accordingly.

Foreclosure filings rose 16% MOM, but are down 77% from a year ago. This is a completely artificial number however due to foreclosure moratoriums. “Extensions to the federal government’s foreclosure moratorium and CARES Act mortgage forbearance program continue to keep foreclosure activity historically low,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “These government actions, and the efforts of lenders and mortgage servicing companies, have helped millions of homeowners avoid foreclosure during a year-long global pandemic and a recession that resulted in 22 million lost jobs.”

Nearly half of all Americans missed a mortgage or rent payment during the pandemic.

The labor market is on the mend, with job openings rising to 6.9 million at the end of January. The quits rate, which tends to lead wage increases was stable at 2.3%.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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