Morning Report: Another benign inflation report

Vital Statistics:

S&P futures4,13115.5
Oil (WTI)82.86-0.41
10 year government bond yield 3.39%
30 year fixed rate mortgage 6.33%

Stocks are higher this morning after another benign inflation report. Bonds and MBS are up.

The producer price index, which measures inflation at the wholesale level, fell 0.5% in March. The decline was driven by a 5.1% decrease in energy prices. The core rate, which strips out food, energy and trade services rose 0.1%. The Street was looking for a flat number, so the decline was a positive surprise.

Initial jobless claims inched higher, rising to 239k. Claims are moving higher, although we are still at extremely low levels if you look at historical numbers

The FOMC minutes were released yesterday. The Silicon Valley Bank situation was still new, but the committee was still focused primarily on inflation:

Participants agreed that the U.S. banking system remained sound and resilient. They commented that recent developments in the banking sector were likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. Participants agreed that the extent of these effects was uncertain. Against this Federal Open Market Committee
background, participants continued to be highly attentive to inflation risks…

Many participants remarked that the incoming data before the onset of the banking sector stresses had led them to see the appropriate path for the federal funds rate as somewhat higher than their assessment at the time of the December meeting. After incorporating the banking-sector developments, participants indicated that their policy rate projections were now about unchanged from December…

With inflation still well above the Committee’s longer run goal of 2 percent, participants agreed that inflation was unacceptably high. Participants commented that recent inflation data indicated slower-than-expected progress on disinflation. In particular, they noted that revisions to the price data had indicated less disinflation at the end of last year than had been previously reported and that inflation was still quite elevated.

Bonds rallies slightly on the FOMC minutes, but nothing dramatic.

United Wholesale is offering 1% down loans. If the borrower brings 1% down, UWM will fill in the other 2%, up to $4,000. “We are bringing back the Conventional 1% Down to give independent mortgage brokers a competitive edge with borrowers and real estate agents, while also helping make homeownership more affordable and accessible for borrowers across the country,” said Mat Ishbia, president and CEO of UWM. “We’re going to continue developing products and solutions that will help get more borrowers into homes faster, easier and cheaper and Conventional 1% Down is a great example of how we’re doing that.”

The program is limited to people who are at or below 50% of the area median income. I suspect affordability constraints are going to make it difficult for borrowers under 50% of AMI to qualify.

Author: Brent Nyitray

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

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