Mortgage Rates Heading Upward Again

Mortgage rates are heading up again.  The recent strong selling n US treasuries are a direct result of the European bond markets selling - Europe these days is leading the US bond market. It was not because of Greece, the selling in Europe triggered by a strong increase in its inflation. 

Here in the US the economy is still not growing as fast as investors and the Fed would like. The IMS manufacturing index yesterday was touted as a good sign, well now -  a tiny increase in the index was not that exciting. This morning April factory orders were thought to be flat declined - March orders were revised higher but factory orders with that exception have been negative (declining) since last July. Yesterday April personal income was good, as it was better than estimated. Income up but consumers still reluctant to spend, spending was flat in April.

Today, just to twist markets more, May US auto and truck sales were much stronger than expected.  I do not see auto sales as a leading indicator for the economy -  sales strong because cars and trucks can be purchased like the sub-prime mortgage crisis -  if you are breathing you can drive a car off the lot. And what about US inflation, so far it is not happening based on the Fed’s preferred report the core index of the personal consumption expenditures gauge is now lagging its more popular counterpart, the consumer price index, by the most since the recession ended in June 2009. The core PCE gauge, which excludes volatile food and energy costs, increased in April.

Tomorrow begins the countdown for the BLS employment data on Friday when at ADP will report its data on private jobs.  Later we will have weekly jobless claims.  And at 9:00AM , we will the May ISM services sector.  Last at 1:00PM, the Fed will release its Beige Book.

Expect increased volatility in the bond and mortgage markets. The rapid increase in rates yesterday and today does not square with my outlook for the US and global economies. Bond selling has been led by increases I rates in Europe - more so than Domestic news.