Mortgage Rates

Mortgage Rates Interest rates markets started about unchanged this morning but drifted slightly lower in price at 9:00 with US stock indexes looking like a better 9:30 open. June producer price index surprised some; the overall PPI was expected down anywhere from -1.2% to -0.4%, as reported the index increased 0.1%. The core (ex food and energy) +0.2%. Yr/yr overall PPI +0.7% while the core is up 2.6%. The 0.1% gain in the producer price index followed a 1.0% decrease in May, Labor Department figures showed today in Washington. The yr/yr overall matched the 12-month gain in May as the smallest since October 2009. The core index yr/yr was the smallest year-to-year gain since June 2011. The gains in the PPI were led by a 0.5% increase in food, reflecting the biggest increase in meat prices since July 2011. Meat prices will continue to increase through the rest of the year with the US corn crop deteriorating daily with the drought and heat. China’s gross domestic product expanded 7.6% last quarter from a year earlier, according to the National Bureau of Statistics. The pace, a three-year low, compares with an 8.1% gain in the previous period and the 7.7% median forecast of economists. In another report Chinese industrial production increased at a slower pace in June, while retail sales growth decelerated. Europe continues to drag the world down. The two reports heightened speculation authorities will roll out additional measures to support growth. Moody’s lowered Italy’s rating to Baa2 from A3 and said further cuts are possible because the nation’s economic outlook has “deteriorated,” according to a statement. The new rating is two levels above junk and one grade higher than Spain. The yield on Italy’s 10-year bond rose 8 basis points to 5.99%. That left the difference with comparable German debt at 475.7 basis points. Moody’s said that its negative outlook reflects the “view that the risks to implementing” reforms aimed at reviving the economy and containing debt “remain substantial.” It added that “the political climate, particularly as the spring 2013 elections draw near, is also a source of implementation risk.” At 9:30 the DJIA opened +40, NASDAQ +12, S&P +4; the 10 yr note 102.12 -4/32 at 1.49% +1 bp with 30 yr mortgage prices +1/32 (.03 bp). 9:55 saw the U. of Michigan consumer sentiment index, expected at 73.5 frm 73.2 at the end of June. Given a 74.1 reading at the June mid-month, points to a low 72 reading for the final two weeks. The index opened the year at 75.0. Weakness was seen in both expectations, down 1.1 points to 67.8, and in currents conditions which is 6 tenths lower to 81.5. This morning the July mid-month index fell to 72.0, the lowest sentiment index since last December. There was no reaction to the weaker index, the stock market essentially ignored it and continued to rally. The latest run to lower US interest rates is looking like it has run out of gas for the moment; the 10 yr note is losing momentum as its yield is unable to break the strong technical resistance at 1.46%. The 10 yr note, since 6/29 (11 sessions) has fallen from 1.68% to 1.49% this morning after hitting 1.46% on Wednesday. Not likely rates will increase much but presently there is less emphasis on safety than has been the case for months. Europe still is in the driver’s seat but this week there hasn’t been any additional negative news that increase more treasury buys. The FOMC minutes on Wednesday disappointed that the Fed may not be ready for another easing as many were expecting.