Remember Jason? The Hockey Mask Guy from Friday the 13th? Considering we're hovering near unchanged, it's safe to say he's at bay for now (and maybe he's at "the bay," as opposed to his normal haunt, the lake, which is good since we're at the lake!). Either way, Inflation Jason took a swing and a miss this morning with his machete of price panic. Maybe he's the Boogie Man we've all been so concerned with?!The Why:
The much anticipated inflation gauge, the CPI report, was released this morning with "as expected" results, easing concerns of runaway inflation. As we know, inflation is the mortal enemy of MBS and other bonds. The more we see, the higher rates go, and indeed it has been the key factor pushing rates higher.
To Lock or Float?
A cautious intraday float will likely net you some coin. Lenders went into "uber-hedge" mode yesterday as they played our downward heavily on the come, pulling out an extra .125 to .375 YSP beyond their normal pricing margins versus MBS. If we can but hold steady this morning, we will get much better rates today than yesterday afternoon. Be sure to refresh the blog often, keep an eye on 5 and 10 year treasuries--if the yield rises more than a couple points, it may be time to lock. Keep an eye out for a stock rally as that may put pressure on bonds. Whatever the case, be vigilant if you float, but floating will likely pay off.
6.0% FNMA OTR is UP (yes, UP) by a scant 1/32nds (4/32nds in Freddie Mac Issues)
5.5 FNMA OTR UP by a more significant 7/32nds, 6.5's are closer to par, they are up 3/32nds
Here's a spooky Friday the 13th Graph for you today (it is actually mostly Friday the 12th, but it shows you what has happened between yesterday and 10:15AM today. As you can see, we're already back at the lower portion of yesterday's levels (but not the lowest levels of late afternoon):
- Consumer Price Index
- Core Rate (excludes food and energy) exactly as expected at .2%
- Headline Rate 1 tick higher than expected at .6%
- The markets like it. We had been gearing up to be surprised for the worse
- Consumer Sentiment
- Came in at 56.7 versus expectations of 59.8
- This was a nice little "boost" to MBS when this was released just now.