April headline Producer Price Index much higher than expected

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Published Date 5/14/2024

Today's Mortgage Rate Summary

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

Rates Currently Trending: Neutral

Mortgage rates are getting a little support today. The MBS market improved by +5 bps yesterday. This was not enough to decrease mortgage rates or fees. The market experienced low volatility yesterday.

Today's Rate Forecast: Neutral

Inflation: The April headline Producer Price Index appeared to be much hotter than expected, rising 0.5% on a MOM basis versus estimates of 0.2%. However, that beat was mostly due to a downward revision in March from +0.2% down to -0.1%. YOY, it matched expectations at 2.2%. Core PPI (ex food and energy) was the same story on a MOM basis. YOY, it was up 2.4% versus estimates of 2.4%.

Optimism: The April NFIB Business Optimism Index was higher than expected, 89.7 versus estimates of 88.1.

The Fed: We will hear from Fed Chair Powell and Fed Governor Cook today.

Today's Potential Rate Volatility: Neutral

This morning markets took the PPI news better than expected with small positive trend. Volatility has started at moderate levels.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

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