 The Industrial Production and Capacity Utilization reports both came in hotter than expectations. This brings a little fear of inflation. Why? These reports show that companies are producing at high levels and they have less excess capacity or slack in the system to produce anymore goods. This means that they are more inclined to raise prices which could be inflationary. Bonds hate inflation and this report has applied pressure on prices today.
Some mixed news on Housing...The number of Housing Starts grew in April to a better than expected 1.528 Million and the strongest pace since December. However, Building Permits came in at an annual rate of 1.429 Million and slightly below expectations. Overall, this was a pretty clean report indicating that Housing continues to show signs of stabilizing and much better than the doom and gloom being portrayed in the media. Mortgage Bonds remain under selling pressure as Stocks continue to climb higher and suck the money out of the Bond market. We continue to advise locking. In the Pacific NW we are still seeing a fairly robust real estate market with normal appreciation. The million dollar question is are long term rates finally heading up or is this another blip on the radar? The current increase appears to be centered more on national news and the stock market, but as I mentioned in an earlier blog, Are Mortgage Rates Heading Higher? , foreign appetite for our long-term debt could be waning. If so, watch rates increase. Just my 2 cents.  Larry Morris is a loan Officer with Equipoint Financial Network in Newberg, Oregon. He specializes in relocations and Sherwood, Oregon neighborhoods and Yamhill COunty. He can be reached at larry.morris@equipoint.com. His website is www.PDX-Mortgage.com . This material is copy protected 2007 by Larry Morris, Mortgage News that Matters. All Rights Reserved His opinions do not necessarily represent the views of Equipoint Financial Network. Licensed in: OR, WA, AL, AK, AZ, CA, CO, CT, FL, GA, HI, ID, IL, IN, IA, MD, MA, MI, MS, MO, MT, NE, NV, NH, NM, OK, SC, SD, TN, TX, UT, VT, VA, | |
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Larry,
Just keep in mind that the last time bonds fell below their 200-day MA, they stayed below it for about 1 1/2 years. Likelihood of interest rates at least rising slightly is very strong. I don't think it will be too much higher though.