Stocks are lower as Iran ups its attacks on US warships. Bonds and MBS are down.
Note that the sell-off in bonds is global. Japanese government bonds, UK Gilts, German Bunds etc. are all seeing increased rates. The European Central Bank raised rates 25 basis points this morning to 2.5%. Needless to say this isn’t helping the case in Treasuries.
The 10-year Treasury has picked up almost 100 basis points in yield since March:
Inflation at the wholesale level rose 0.4% MOM and 5.4% YOY. The index ex-food and energy rose 0.3% MOM and 4.7% YOY. The producer price index is an input into consumer inflation, not final inflation. The increase in the PPI was unsurprisingly driven by higher energy prices, particularly diesel which rose 24%. The index for final demand services rose 0.1%.
In the aftermath of the PPI report, the September Fed Funds futures see a 64% chance of a rate hike next week.
Initial Jobless Claims fell to 206,000 last week. The labor market continues to exhibit strength.
Mortgage credit availability decreased in August according to the MBA. This was driven by a decrease in cash-out refis and bank statement loans. “Credit availability decreased in August, as lenders reduced their offerings of loan programs that require flexible documentation, along with cash-out refinance loans,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “Many of these loan programs had jumbo features, which contributed to the decline in jumbo credit availability. The conforming index was unchanged and remained in a narrow range as conforming lending standards and loan offerings continue to be conservative, even as mortgage rates are at their highest levels in more than a year.”
