Mortgage Rates - A Lot of Improvements Seen This Morning

Sorry about the delay today, but had a bad tire and of course, the tire place did not have what I needed it stock…

At Noon, we have seen a lot of improvements in regard to the mortgage rates just as I stated yesterday afternoon in my report.  I had anticipated with the changes we were seeing, I would be recommending a change to float as we saw the two data points this morning. April retail sales, expected up 0.6% was +0.4%, but the March retail sales originally reported -0.2% was revised to +0.1%. April CPI also expected to be +0.2% was in line +0.2%, but March was down -.3%. Overall CPI 2.2% slightly less than 2.3% expected.

The reaction to both reports pushed MBS prices higher (lower mortgage rates) and the 10yr note yield down to 2.34% from yesterday’s close.

Yesterday April PPI (wholesale prices) exceeded forecasts - this morning consumer measurements did not confirm the higher prices. Maybe next month when the wholesale price increases filter to the consumer level. Nevertheless, inflation was a worry yesterday, today not so much. Continued price weakness in medical care, down 0.2 percent in the month, and continuing contraction for communications where providers are in a price war. Apparel is down for a second month with transportation showing only a fractional gain after two prior months of contraction. Owners' equivalents rent, which is closely watched in gauging the housing sector, rose only 0.2 percent.

Retail sales in April did not meet forecasts, but vehicle sales increased 0.7 percent in April following three straight sizable declines. Non-store retailers continue to outperform with electronics & appliances showing a second healthy gain.  It should be clear with the data this morning that consumer spending, where that rubber meets the road, are not putting their money where the increased confidence occurs in those surveys. Despite a very easy comparison against a very weak first quarter, second quarter consumer spending is off to no better than a moderate start. (see below for this morning’s release from the U. of Michigan consumer sentiment index).

The last two reports, the mid-month U. of Michigan consumer sentiment index was slightly better than anticipated – and March business inventories increased just a bit over as well.  There was little reaction to these when they came out.

It is the weekend, and if you are about to close, lock it down as you certainly have been fortunate with the news today.  However, if you like the risk and feel that it can be better, do so with caution.