Dennis' Mortgage Blog

Consumers are mostly liking the price action in several markets today, and as a result mortgage rates are continuing their decline after a brief break yesterday.

Oil has dropped below $100 per barrel, gasoline (nationwide not in California) has dropped 8%, silver and gold prices are dropping and corn futures are joining the decline.  These major commodities have been the primary markers for the economy and most importantly consumers wallets.

As a result of these drops stock markets are red arrows across the board with the Dow down over 150 points at mid-day.  Where is the money going?  Bonds, U.S. Bonds.

The Treasury auctioned $24 billion in 10-year notes today and there was plenty of buying driving prices up and yields down.  The yield on the 10-year dropped to its lowest level in six months at 3.21%.  This is good news for mortgage applicants as the 30 year fixed rate is closely tied to the yields on the 10-year Treasury note.

With some heavy economic news due out in the next two days investors are lining up already on bonds---an action they would not be taking if they thought prices would be dumping tomorrow and Friday. (Remember lower prices for bonds means higher interest rates)  The Producer Price Index (PPI) and Consumer Price Index (CPI) for April are reported Thursday and Friday respectively.

While the prices of oil, gold, silver, corn and bonds are important, the prices reported the next two days will determine the direction for interest rates for the next cycle.  High PPI and CPI will show inflation and cause a sell of on bonds and increase in rates, low PPI and CPI will show inflation is not prevalent in the market and rates will continue at their current levels or drop further.

My expectations for the PPI and CPI numbers for April is a sharp increase in the gross numbers that include energy and food prices and relatively little change in the core numbers that exclude energy and food.  April saw sharp rises in gasoline and oil costs for producers and consumers and continued food price increases.  With the extra money at the pump and the Safeway consumers tightened demand for other goods and services.  That's my opinion, we'll see if it is correct.

Ahead of the PPI/CPI numbers gamblers may want to float their rates, those with a heave risk-avoidance gene will want to lock in their gains today.

Mortgage rates continue to remain low for the time being.  Call or email Dennis today to determine your purchasing power for a new home loan or monthly savings from a refinance.  Direct dial 562-472-1118