SHORT-TERM TREND (10 days or less). Different day . same story. Favors lower rates and higher investor prices but very vulnerable to a near-term reversal.
LONG-TERM TREND (11 days or more) Tilted in favor of lower rates and higher investor prices.
Commentary: As I write trading activity in the mortgage market is quiet -- with a slight bias favoring higher prices and lower rates. Earlier in the day selling action in the mortgage-backed security market tried to force interest rates a touch higher -- but that little "dust-up" ended pretty quickly and the balance between buy and sell orders has drifted back in favor of the buyers.
The early morning swoon in the mortgage market was created by a knee-jerk reaction on the part of a relatively few traders to the detail contained the Labor Department's release of the October Producer Price Index. These market participants were evidently hyper-sensitive to the component of the report that indicated core prices for intermediate goods have not deviated from the steady climb to higher levels that began in early spring. That's really working hard to find a reason to sell since all of the other aspects of this report remained well below the consensus expectations.
The headline producer price index rose by a very modest 0.3% in October while the core producer price index (a value that excludes the more volatile food and energy prices) unexpectedly dropped 0.6% - its largest monthly decline since July 2006.
Calmer, cooler heads have now moved in to completely counter the earlier selling pressure in the mortgage market. These more experienced traders clearly know that with output and employment expected to remain modest well into the coming year, producer price inflation will likely be a "no show" for some time to come.
As expected, the separate October Industrial Production and Capacity Utilization report released later in this morning trading session drew little more than a passing glance from mortgage investors.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
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About Me
- David Kimmer
- Beaverton, OR, United States
- David is a loan officer for American Pacific Mortgage. He has worked in the lending industry since 2000. Prior to that he invested 19 years in the insurance industry. He enjoys helping people finance the purchase of their dream home.
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