The hits keep coming this morning as the CPI (consumer price index), which measures the cost of the same goods as the PPI (Producer Price Index), but at the consumer level as opposed to the producer level, came in at .8. It was expected at .7, so one might wonder "what's the big deal?'
The problem is that this is the highest measure of the index in over two years. That's bad news for the inflation wary. When inflation rises, bonds are devalued. As bond yields move the same direction as mortgage rates, rates go up.
And that's what they are doing this morning. In addition the Industrial Production Report was slightly off the numbers expected, and though it probably didn't add to the damage of the CPI report, it certainly didn't help.
As a result, FNMA 6.0% coupon is currently bid at 100.30. Rates should be slightly higher this morning by .125% of a discount point over yesterdays rates (assuming your lender repriced yesterday). If your lender did not reprice yesterday afternoon, rates will be worse by closer to .375%
30 YEAR FIXED PAR NOTE RATE: 5.875%
LOCK RECOMMENDATION: The news is out of the way for today, so we will watch stocks today to try and gauge the direction of the stocks. The DOW is moving up currently. CITI announced they will be taking on a huge amount in SIV's (structured investment vehicles) in order to deal with their subprime problem. This could lead to a further rally in the markets today which will push rates higher. If you are closing soon, safe play is to lock in light of this news from CITI. Longer term, the see-saw upward trend of bond prices suggests floating as prices dropped significantly.