Bonds Attempt Turnaround: Interest rates increased from 2.86% to 2.88%, which is 99 bp or 1% lower than this time last year. Remember the MBA rate is for last week and always includes a fraction of points in their rate.
The Consumer Price Index (CPI), which measures inflation on the consumer level, was up 0.4% for the month of December. The year over year reading increased from 1.2% to 1.4%. About 60% of the rise was due to gasoline prices.
The Core Reading, which strips out food and energy prices, was up only 0.1% month over month and the year over year reading remained stable at 1.6%. When taking service inflation out of the picture, goods prices were up 1.7% year over year and is the fastest pace since April 2012. This has to do with the supply chain issues companies are having that is causing the cost of goods to rise.
Rents are rising 2.3% across the US, which is down from 2.4% from the previous month. Many markets are seeing rents rise at a faster pace, but some of the major cities are seeing sharp declines and dragging down the overall figure.
Later today at 1:00 pm ET there will be a 30-year Bond Auction. We will update you with the results in the Market News section of the Markets overview page. The strong 10-year Auction yesterday helped Bonds to recover all of their losses so a strong auction today could help Bonds to continue their rebound.
Mortgage Bonds broke beneath their 200-day Moving Average yesterday but are climbing back above it this morning. This is a very important level because a convincing break beneath it could signal a sea change. Typically Bonds will trade above or below the 200-day Moving Average once a break has been made for an extended period. If the rise in MBS prices continues we could get some momentum from the Stochastic chart – We are starting to see a positive crossover, which is a bullish sign for Bonds. Start the day floating.